Output Fluctuations in the United States: What Has Changed Since the Early 1980s?

McConnell, Margaret M.; Pérez‐Quirós, Gabriel

doi:10.2139/ssrn.938810

Cited by 442 publications

(491 citation statements)

References 19 publications

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“…Inspection of Fig. 1 demonstrates the 'Great Moderation' emphasized by McConnell and Quiros (2000) and Stock and Watson (2003). About 1984 there was a simultaneous decline in the volatility of inflation and GDP.…”

Section: An Empirical Overviewmentioning

confidence: 98%

“…An array of econometric techniques to identify the regime shift have been employed by Bernanke and Mihov (1998), Kim and Nelson (1999), Kim et al (2004), McConnell and Quiros (2000), Sensier and van Dijk (2004), and Stock and Watson (2003). Recently, though, Cogley and Sargent (2005a) and Sims and Zha (2006) have identified repeated regime shifting economic volatility in US inflation and GDP growth.…”

Section: An Empirical Overviewmentioning

confidence: 99%

“…This observation is often described in the applied literature as a regime shift during the 1980s which resulted in a simultaneous decline in inflation and output volatility. The 'Great Moderation', econometrically identified by Stock and Watson (2003) and McConnell and Quiros (2000), among others, is often associated with a change in the stance of monetary policy (e.g. Branch et al, 2006).…”

Section: Introductionmentioning

confidence: 99%

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Model uncertainty and endogenous volatility

Branch

Evans

2007

Review of Economic Dynamics

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This paper identifies two channels through which the economy can generate endogenous inflation and output volatility, an empirical regularity, by introducing model uncertainty into a Lucas-type monetary model. The equilibrium path of inflation depends on agents' expectations and a vector of exogenous random variables. Following Branch and Evans agents are assumed to underparameterize their forecasting models [Branch, W., Evans, G.W., 2006a. Intrinsic heterogeneity in expectation formation. Journal of Economic Theory 127, 264-295]. A Misspecification Equilibrium arises when beliefs are optimal, given the misspecification, and predictor proportions are based on relative forecast performance. We show that there may exist multiple Misspecification Equilibria, a subset of which is stable under least squares learning and dynamic predictor selection. The dual channels of least squares parameter updating and dynamic predictor selection combine to generate regime switching and endogenous volatility.

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Section: An Empirical Overviewmentioning

confidence: 98%

Section: An Empirical Overviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Model uncertainty and endogenous volatility

Branch

Evans

2007

Review of Economic Dynamics

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“…We will apply this methodology following the approach proposed by McConnell and Pérez-Quirós (2000) and Camacho (2004). This approach allows us to obtain a profile of pvalues and to delimit periods of stability and instability in the variance of not only the bilateral RERs but in the variance of the effective RERs too.…”

Section: Introductionmentioning

confidence: 99%

Structural breaks in volatility: Evidence for the OECD and non-OECD real exchange rates

Morales‐Zumaquero

Sosvilla‐Rivero

2010

Journal of International Money and Finance

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This paper attempts to determine whether or not nominal exchange rate regimes affect the volatility of bilateral and effective real exchange rates. To that end, we examine the real exchange rate behaviour for a set of OECD and non-OECD countries during the 1960-2006 period, therefore covering both the Bretton Woods system of fixed exchange rates and adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on the Hansen (1997)'s approximation to the p-values of the supreme, exponential and average statistics developed by Andrews (1993) and Andrews and Ploberger (1994). This methodology allows us to obtain a profile of pvalues and to delimit periods of stability and instability in the variance of real exchange rates. Results suggest that there is clear evidence in favour of the non-neutrality of nominal exchange rate regime regarding real exchange rate volatility for developed countries, but not in the case of developing or emerging countries. JEL Classification Numbers: F31, F33, F41

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“…The empirical evidence has suggested that time-varying behaviour, in particular a general decline, in unconditional volatility in the shocks driving macroeconomic time-series over the past twenty years or so is a relatively common phenomenon; see, inter alia, Kim and Nelson (1999), McConnell and Perez Quiros (2000), Van Dijk, Osborn, and Sensier (2002), Sensier and Van Dijk (2004) and references therein. 1 Sensier and Van Dijk (2004), for example, report that over 80% of the real and price variables in the Stock and Watson (1999) data-set reject the null of constant unconditional innovation variance.…”

Section: Introductionmentioning

confidence: 99%

Lag Length Selection for Unit Root Tests in the Presence of Nonstationary Volatility

Cavaliere

Phillips

Smeekes³

et al. 2012

SSRN Journal

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A number of recently published papers have focused on the problem of testing for a unit root in the case where the driving shocks may be unconditionally heteroskedastic. These papers have, however, assumed that the lag length in the unit root test regression is a deterministic function of the sample size, rather than data-determined, the latter being standard empirical practice. In this paper we investigate the finite sample impact of unconditional heteroskedasticity on conventional data-dependent methods of lag selection in augmented Dickey-Fuller type unit root test regressions and propose new lag selection criteria which allow for the presence of heteroskedasticity in the shocks. We show that standard lag selection methods show a tendency to over-fit the lag order under heteroskedasticity, which results in significant power losses in the (wild bootstrap implementation of the) augmented Dickey-Fuller tests under the alternative. The new lag selection criteria we propose are shown to avoid this problem yet deliver unit roots with almost identical finite sample size and power properties as the corresponding tests based on conventional lag selection methods when the shocks are homoskedastic.

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Output Fluctuations in the United States: What Has Changed Since the Early 1980s?

Cited by 442 publications

References 19 publications

Model uncertainty and endogenous volatility

Model uncertainty and endogenous volatility

Structural breaks in volatility: Evidence for the OECD and non-OECD real exchange rates

Lag Length Selection for Unit Root Tests in the Presence of Nonstationary Volatility

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