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Great Moderation And Great Recession: From Plain Sailing To Stormy Seas?

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  • María Dolores Gadea
  • Ana Gómez‐Loscos
  • Gabriel Pérez‐Quirós

Abstract

Many have argued that the Great Recession of 2008 marks the end of the reduction in output volatility known as the Great Moderation. This article shows that this is not the case through an empirical analysis. Output volatility remains subdued despite the output loss of the Great Recession. This finding has important implications for policymaking because we also find that a lower volatility of output is associated with slower recoveries.

Suggested Citation

  • María Dolores Gadea & Ana Gómez‐Loscos & Gabriel Pérez‐Quirós, 2018. "Great Moderation And Great Recession: From Plain Sailing To Stormy Seas?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(4), pages 2297-2321, November.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:4:p:2297-2321
    DOI: 10.1111/iere.12337
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    Cited by:

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    3. Esteve Vicente & Prats Maria A., 2021. "Structural Breaks and Explosive Behavior in the Long-Run: The Case of Australian Real House Prices, 1870–2020," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 15(1), pages 72-84, January.
    4. Emilio Congregado & Carmen Díaz-Roldán & Vicente Esteve, 2023. "Deficit sustainability and fiscal theory of price level: the case of Italy, 1861–2020," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(3), pages 755-782, August.
    5. Catherine Doz & Laurent Ferrara & Pierre-Alain Pionnier, 2020. "Business cycle dynamics after the Great Recession: An extended Markov-Switching Dynamic Factor Model," OECD Statistics Working Papers 2020/01, OECD Publishing.
    6. Florian Misch & Martin Rey, 2022. "The case for a loan-based euro area stability fund," Discussion Papers 20, European Stability Mechanism, revised 05 May 2022.
    7. Erdenebat Bataa, 2019. "Growth and Inflation Regimes in Greater Tumen Initiative Area," The Northeast Asian Economic Review, ERINA - Economic Research Institute for Northeast Asia, vol. 7(1), pages 15-29, November.
    8. Sun, Weihong & Liu, Ding, 2023. "Great moderation with Chinese characteristics: Uncovering the role of monetary policy," Economic Modelling, Elsevier, vol. 121(C).
    9. Pierre Perron & Yohei Yamamoto, 2022. "The great moderation: updated evidence with joint tests for multiple structural changes in variance and persistence," Empirical Economics, Springer, vol. 62(3), pages 1193-1218, March.
    10. Vicente Esteve & María A. Prats, 2021. "Testing for rational bubbles in Australian housing market from a long-term perspective," Working Papers 2113, Department of Applied Economics II, Universidad de Valencia.
    11. Shah, Adil Ahmad & Paul, Manas & Bhanja, Niyati & Dar, Arif Billah, 2021. "Dynamics of connectedness across crude oil, precious metals and exchange rate: Evidence from time and frequency domains," Resources Policy, Elsevier, vol. 73(C).
    12. Matei Demetrescu & Robinson Kruse-Becher, 2021. "Is U.S. real output growth really non-normal? Testing distributional assumptions in time-varying location-scale models," CREATES Research Papers 2021-07, Department of Economics and Business Economics, Aarhus University.
    13. Congregado, Emilio & Esteve, Vicente, 2022. "Cointegration with structural changes and classical model of inflation in Spain, 1830–1998," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 376-388.

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