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The Time Varying Volatility of Macroeconomic Fluctuations

Author

Listed:
  • Alejandro Justiniano

    (Board of Governors of the Federal Reserve Board
    Giorgio Primiceri)

  • Northwestern University
Abstract
In this paper we investigate the sources of the important shifts in the volatility of U.S. macroeconomic variables in the postwar period. To this end, we propose the estimation of DSGE models allowing for time variation in the volatility of the structural innovations. We apply our estimation strategy to a large-scale model of the business cycle and and that investment specific technology shocks account for most of the sharp decline in volatility of the last two decades

Suggested Citation

  • Alejandro Justiniano & Northwestern University, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," Computing in Economics and Finance 2006 219, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:219
    as

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    More about this item

    Keywords

    Great Moderation; Stochastic Volatility; Investment Specific Technology Shock; Relative Price of Investment; DSGE Models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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