Volatility co-movement and the great moderation: An empirical analysis

Arbeitspapier

We propose an extended time-varying parameter Vector Autoregression that allows for an evolving relationship between the variances of the shocks. Using this model, we show that the relationship between the conditional variance of GDP growth and the long-term interest rate has become weaker over time in the US. Similarly, the co-movement between the variance of the long-term interest rate across the US and the UK declined over the 'Great Moderation' period. In contrast, the volatility of US and UK GDP growth appears to have become increasingly correlated in the recent past.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 804

Classification and Topics

• Classification: Wirtschaft ; Statistical Simulation Methods: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Business Fluctuations; Cycles
• Subject: Vector-Autoregressions ; Time-Varying parameters ; Stochastic Volatility

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mumtaz, Haroon ; Theodoridis, Konstantinos
• Event: Veröffentlichung
• (who): Queen Mary University of London, School of Economics and Finance
• (where): London
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/175241
• Last update: 10.03.2025, 11:44 AM CET