Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 7-Day Trial for You or Your Team.

Learn More →

VAR Analysis and the Great Moderation

VAR Analysis and the Great Moderation Most analyses of the US Great Moderation are based on structural VARs, and point toward good luck as the main explanation for the recent macroeconomic stability. Based on an estimated New-Keynesian model where the only source of change is the move from passive to active monetary policy, we show that (i) the theoretical VAR innovation variances for all series decrease across regimes; (ii) VAR-based counterfactuals assign a minor role to improved policy; and (iii) VAR impulse-response functions to a monetary shock exhibit little variation across regimes. Our analysis suggests that existing VAR evidence is also compatible with the “good policy” hypothesis. ( JEL C32, C52, E13, E52, N12) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

VAR Analysis and the Great Moderation

Benati, Luca; Surico, Paolo
American Economic Review , Volume 99 (4) – Sep 1, 2009
Download PDF
17 pages

Loading next page...
 
/lp/american-economic-association/var-analysis-and-the-great-moderation-CPxnAbvmam

References (111)

Publisher
American Economic Association
Copyright
Copyright © 2009 by the American Economic Association
Subject
Shorter Papers
ISSN
0002-8282
DOI
10.1257/aer.99.4.1636
Publisher site
See Article on Publisher Site

Abstract

Most analyses of the US Great Moderation are based on structural VARs, and point toward good luck as the main explanation for the recent macroeconomic stability. Based on an estimated New-Keynesian model where the only source of change is the move from passive to active monetary policy, we show that (i) the theoretical VAR innovation variances for all series decrease across regimes; (ii) VAR-based counterfactuals assign a minor role to improved policy; and (iii) VAR impulse-response functions to a monetary shock exhibit little variation across regimes. Our analysis suggests that existing VAR evidence is also compatible with the “good policy” hypothesis. ( JEL C32, C52, E13, E52, N12)

Journal

American Economic Review – American Economic Association

Published: Sep 1, 2009

There are no references for this article.