 The Great Moderation Under the Microscope: Decomposition of Macroeconomic Cycles in US and UK Aggregate DemandPatrick Crowley and Andrew Hughes Hallett A chapter in Wavelet Applications in Economics and Finance, 2014, pp 47-71 from Springer Abstract: Abstract In this paper the relationship between the growth of real GDP components is explored in the frequency domain using both static and dynamic wavelet analysis. This analysis is carried out separately for both the US and the UK using quarterly data, and the results are found to be substantially different in the two countries. One of the key findings in this research is that the “great moderation” shows up only at certain frequencies, and not in all components of real GDP. We use these results to explain why the incidence of the great moderation has been so patchy across GDP components, countries and time periods. This also explains why it has been so hard to detect periods of moderation (or otherwise) reliably in the aggregate data. We argue it cannot be done without breaking the GDP components down into their frequency components across time and these results show why: the predictions of traditional real business cycle theory often appear not to be upheld in the data. Keywords: Exchange Rate; Monetary Policy; Business Cycle; Fiscal Policy; Shock Absorber (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-319-07061-2_3 Ordering information: This item can be ordered from DOI: 10.1007/978-3-319-07061-2_3 Access Statistics for this chapter More chapters in Dynamic Modeling and Econometrics in Economics and Finance from Springer |
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