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A NOTE ON MEASURING US TIME SERIES VOLATILITY DURING THE GREAT MODERATION

Published online by Cambridge University Press:  26 June 2019

Isaiah Hull
Isaiah Hull*
Affiliation:
Research Division, Sveriges Riksbank
*
Address correspondence to: Isaiah Hull, Research Division, Sveriges Riksbank, SE-103 37, Stockholm, Sweden. e-mail: isaiah.hull@riksbank.se. Phone: +46 076 589 0661. Fax: +46 80 821 0531.
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Abstract

We identify volatility breaks in all testable series in the FRED database over the 1957–2013 period. This yields 17,681 breaks, which we categorize using text analysis. We show that 70.5% of series categories experienced a decline in volatility over the 1985–1999 period, suggesting that the Great Moderation was far broader in scope than the literature has documented. We also show that this decline reversed in 2000, leading to a sharp increase in volatility for most time series categories; however, this did not fully materialize in GDP volatility until the Great Recession. Finally, we identify labor markets, demographics, finance, and government debt as potential drivers of low-frequency shifts in volatility over the 1957–2013 period.

Keywords

Great ModerationMacroeconomicsBusiness CyclesVolatility
Type
Notes
Information
Macroeconomic Dynamics , Volume 25 , Issue 4 , June 2021 , pp. 1126 - 1143
Copyright
© Cambridge University Press 2019

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Footnotes

I would like to thank Gaetano Antinolfi, Martin D. Evans, Edward Kung, Andres Liberman, Jesper Lindé, Alexander Ludwig, George Skiadopoulos, Hiroatsu Tanaka, Robert Vigfusson, and Xin Zhang, as well as participants at the GSMG, CEF, and SNDE for their comments and suggestions. The views expressed in this paper are solely the responsibility of the author and should not be interpreted as reflecting the views of the Executive Board of Sveriges Riksbank.

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