Great Moderation(s) and U.S. Interest Rates: Unconditional Evidence

James Nason and Gregor Smith

No 273616, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: The US economy experienced a Great Moderation sometime in the mid-1980s – a fall in the volatility of output growth – at the same time as a fall in both the volatility of inflation and the average rate of inflation. We put this moderation in historical perspective by comparing it to the post-WWII moderation. According to theory, the statistical moments – both real and nominal – that shift during these moderations in turn influence interest rates. We examine the predictions for shifts in the unconditional average of US interest rates. A central finding is that such shifts probably were due to changes in average inflation rather than to those in the variances of inflation and consumption growth.

Keywords: Financial Economics; International Development (search for similar items in EconPapers)
Pages: 36
Date: 2007-11
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Related works:
Journal Article: Great Moderation(s) and US Interest Rates: Unconditional Evidence (2008)
Working Paper: Great moderations and U.S. interest rates: unconditional evidence (2008)
Working Paper: Great Moderation(s) And U.s. Interest Rates: Unconditional Evidence (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:273616

DOI: 10.22004/ag.econ.273616

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