Research Discussion Papers, Bank of Finland
No 13/2011:
The great moderation under the microscope: decomposition of macroeconomic cycles in US and UK aggregate demand
Patrick M Crowley ()
and Andrew Hughes Hallett
Abstract: In this paper the relationship between the growth of real
GDP components is explored in the frequency domain using both static and
dynamic wavelet analysis. This analysis is carried out separately for the
US and UK using quarterly data, and the results are found to be
substantially different for the two countries. One of the key findings of
this research is that the ‘great moderation’ shows up only at certain
frequencies, and not in all components of real GDP. We use these results to
explain why the incidence of the great moderation has been so patchy across
GDP components, countries and time periods. This also explains why it has
been so hard to detect periods of moderation (or other periods) reliably in
the aggregate data. We argue this cannot be done without separating the GDP
components into their frequency components over time. Our results show why:
the predictions of traditional real business cycle theory often appear not
to be upheld in the data.
Keywords: business cycles; growth cycles; discrete wavelet analysis; US real GDP; UK real GDP; (follow links to similar papers)
JEL-Codes: C49; E20; E32; (follow links to similar papers)
37 pages, May 23, 2011
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
BoF_DP_1113.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
