Great Moderation(s) and U.S. Interest Rates: Unconditional Evidence

The US economy experienced a Great Moderation sometime in the mid-1980s – a fall in the volatility of output growth – at the same time as a fall in both the volatility of inflation and the average rate of inflation. We put this moderation in historical perspective by comparing it to the post-WWII moderation. According to theory, the statistical moments – both real and nominal – that shift during these moderations in turn influence interest rates. We examine the predictions for shifts in the unconditional average of US interest rates. A central finding is that such shifts probably were due to changes in average inflation rather than to those in the variances of inflation and consumption growth.


Issue Date:
2007-11
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/273616
Language:
English
Total Pages:
36
JEL Codes:
E32; E43; N12
Series Statement:
Working Paper No. 1140




 Record created 2018-06-13, last modified 2020-10-28

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)