A Cautionary Tale of Fat Tails

Chetan Dave, Scott Dressler () and Samreen Malik ()
Additional contact information
Samreen Malik: NYU Abu Dhabi, Division of Social Sciences, https://nyuad.nyu.edu/en/academics/divisions/social-science/faculty/samreen-malik.html

No 53, Villanova School of Business Department of Economics and Statistics Working Paper Series from Villanova School of Business Department of Economics and Statistics

Abstract: Several macroeconomic time series exhibit excess kurtosis or "Fat Tails" possibly due to rare but large shocks (i.e., tail events). We document the extent to which tail events are attributable to long-run growth shocks. We show that excess kurtosis is not a uniform characteristic of postwar US data, but attributable to episodes containing well-documented growth shocks. A general equilibrium model captures these observations assuming Gaussian business-cycle shocks and a single growth shock from various sources. The model matches the data best with a growth shock to labor productivity while investment-specific technology shocks drive cycles.

Keywords: fat tails; growth shocks; real business cycles (search for similar items in EconPapers)
JEL-codes: E0 E3 (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-ban, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: A Cautionary Tale of Fat Tails (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:vil:papers:53

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