The great moderation and the financial cycle
Autor(a) principal: | |
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Data de Publicação: | 2022 |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.5/25067 |
Resumo: | We show that the defining features of the Great Moderation were a shift from output volatility to mediumterm fluctuations and a shift in the origin of those fluctuations from the real to the financial sector. We discover a Granger-causal relationship by which financial cycles attenuate short-term business cycle fluctuations while they amplify longer-term fluctuations at the same time. As a result, financial shocks systematically drive medium-term output fluctuations whereas real shocks drive short-term output fluctuations. We use these results to argue that the Great Moderation and Great Recession both result from the same economic forces. On the theoretical front, we show that long-run risk is a critical ingredient of DSGE models with financial sectors that seek to replicate these shifts. Finally, we used this DSGE model to refine “good luck” and “good policy” hypothesis of the Great Moderation |
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The great moderation and the financial cycleGreat ModerationBusiness CycleFinancial CycleFrequency-DomainWe show that the defining features of the Great Moderation were a shift from output volatility to mediumterm fluctuations and a shift in the origin of those fluctuations from the real to the financial sector. We discover a Granger-causal relationship by which financial cycles attenuate short-term business cycle fluctuations while they amplify longer-term fluctuations at the same time. As a result, financial shocks systematically drive medium-term output fluctuations whereas real shocks drive short-term output fluctuations. We use these results to argue that the Great Moderation and Great Recession both result from the same economic forces. On the theoretical front, we show that long-run risk is a critical ingredient of DSGE models with financial sectors that seek to replicate these shifts. Finally, we used this DSGE model to refine “good luck” and “good policy” hypothesis of the Great ModerationISEG - REM - Research in Economics and MathematicsRepositório da Universidade de LisboaLucke, Friedrich2022-08-01T12:56:50Z2022-072022-07-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/25067engLucke, Friedrich (2022). "The great moderation and the financial cycle". REM Working paper series, nº 0238/20222184-108Xinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:54:41Zoai:www.repository.utl.pt:10400.5/25067Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:09:00.964823Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
The great moderation and the financial cycle |
title |
The great moderation and the financial cycle |
spellingShingle |
The great moderation and the financial cycle Lucke, Friedrich Great Moderation Business Cycle Financial Cycle Frequency-Domain |
title_short |
The great moderation and the financial cycle |
title_full |
The great moderation and the financial cycle |
title_fullStr |
The great moderation and the financial cycle |
title_full_unstemmed |
The great moderation and the financial cycle |
title_sort |
The great moderation and the financial cycle |
author |
Lucke, Friedrich |
author_facet |
Lucke, Friedrich |
author_role |
author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade de Lisboa |
dc.contributor.author.fl_str_mv |
Lucke, Friedrich |
dc.subject.por.fl_str_mv |
Great Moderation Business Cycle Financial Cycle Frequency-Domain |
topic |
Great Moderation Business Cycle Financial Cycle Frequency-Domain |
description |
We show that the defining features of the Great Moderation were a shift from output volatility to mediumterm fluctuations and a shift in the origin of those fluctuations from the real to the financial sector. We discover a Granger-causal relationship by which financial cycles attenuate short-term business cycle fluctuations while they amplify longer-term fluctuations at the same time. As a result, financial shocks systematically drive medium-term output fluctuations whereas real shocks drive short-term output fluctuations. We use these results to argue that the Great Moderation and Great Recession both result from the same economic forces. On the theoretical front, we show that long-run risk is a critical ingredient of DSGE models with financial sectors that seek to replicate these shifts. Finally, we used this DSGE model to refine “good luck” and “good policy” hypothesis of the Great Moderation |
publishDate |
2022 |
dc.date.none.fl_str_mv |
2022-08-01T12:56:50Z 2022-07 2022-07-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.5/25067 |
url |
http://hdl.handle.net/10400.5/25067 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Lucke, Friedrich (2022). "The great moderation and the financial cycle". REM Working paper series, nº 0238/2022 2184-108X |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
ISEG - REM - Research in Economics and Mathematics |
publisher.none.fl_str_mv |
ISEG - REM - Research in Economics and Mathematics |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799131184144318464 |