The "Great Moderation" in the United Kingdom
Luca Benati ()
No 769, Working Paper Series from European Central Bank
We use a Bayesian time-varying parameters structural VAR with stochastic volatility for GDP deflator inflation, real GDP growth, a 3-month nominal rate, and the rate of growth of M4 to investigate the underlying causes of the Great Moderation in the United Kingdom. Our evidence points towards a dominant role played by shocks in fostering the more stable macroeconomic environment of the last two decades. Results from counter-factual simulations, in particular, show that (1) the Great Inflation was due, to a dominant extent, to large demand non-policy shocks, and to a lesser extent JEL Classification: E32, E47, E52, E58
Keywords: Bayesian VARs; European Monetary System; frequency domain; great inflation; identified VARs; lucas critique; policy counterfactuals; stochastic volatility; timevarying parameters (search for similar items in EconPapers)
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Journal Article: The "Great Moderation" in the United Kingdom (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2007769
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