Nick Bloom, Macro Topics, Spring 2007 Nick Bloom Great Moderation.

Slides:



Advertisements
Similar presentations
Commodities, inflation and finance: The risks of 21 st century stagflation Jayati Ghosh.
Advertisements

Keynesian Model of the trade balance TB & income Y. Key assumption: P fixed =>. Mundell-Fleming model Key additional assumption: international capital.
1 Innovation, Change, Black Swans, and Financial Crises David Marshall* Senior Vice President Federal Reserve Bank of Chicago PhD Project Finance Doctoral.
New Classical Macro and New Keynesian Macro
Chapter 27 Information Problems and Channels for Monetary Policy.
BY: MUSHTAQ UR REHMAN MOHAMMAD ALI JINNAH UNIVERSITY, ISLAMABAD CAMPUS & SHAFIQ UR REHMAN SCHOOL OF MANAGEMENT UNIVERSITY OF LIVERPOOL,UK.
Towards an integrated macro-finance framework for monetary policy NBB Conference Brussels, 16 October Liquidity, inflation and asset prices in a.
17:Long-Term Economic Growth
Nick Bloom, Applied Econometrics, Winter 2010 APPLIED ECONOMETRICS Lecture 2 – Research Projects.
Money, Financial Crises, and Business Cycles Edward C. Prescott July 7, 2010.
Chapter 11 Classical Business Cycle Analysis: Market-Clearing Macroeconomics Copyright © 2012 Pearson Education Inc.
© The McGraw-Hill Companies, Inc., 2008 McGraw-Hill/Irwin Chapter 22 Understanding Business Cycle Fluctuations.
CHAPTER 1 Prepared by: Fernando Quijano and Yvonn Quijano CHAPTER 1 A Tour of The World © 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier.
Introduction to Economic Fluctuations
Bloom, Floetotto, Jaimovich, “Really Uncertain Business Cycles”
CHAPTER 22 © 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier Blanchard Depressions and Slumps Prepared by: Fernando Quijano and Yvonn.
Copyright © 2002 Pearson Education, Inc. Macroeconomic Costs of Information Problems Information problems can create obstacles for borrowers who need external.
7-1 Aggregate Supply The aggregate supply relation captures the effects of output on the price level. It is derived from the behavior of wages and prices.
Chapter 22: Depressions and Slumps Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Macroeconomics, 5/e Olivier Blanchard 1 of 43 Depressions.
U.S. Federal Deficit and the Unemployment Rate. U.S. Federal Deficit and the Real Interest Rate,
Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Chapter 17 New Classical Macro Confronts New Keynesian Macro.
The Relationship Between Inflation and Unemployment
CHAPTER 1 A Tour of The World CHAPTER 1 Prepared by: Fernando Quijano and Yvonn Quijano Copyright © 2009 Pearson Education, Inc. Publishing as Prentice.
The Dawn of a New Economic Era? Russia Economic Report April 2015 | Edition No. 33.
Aggregate Demand. Aggregate Demand Aggregate Demand slopes downward like other demand curves, but for different reasons.
Copyright © 2001 by Houghton Mifflin Company. All rights reserved. 1 Economics THIRD EDITION By John B. Taylor Stanford University.
©2003 South-Western Publishing, A Division of Thomson Learning
NUIG Macro 1 Lecture 19: The IS/LM Model (continued) Based Primarily on Mankiw Chapters 11.
Standard 3: Understand Economic Systems EQ 3.03 Explain the Stock Market.
Economic Models The selection of variables What is the difference between an endogenous variable and an exogenous variable? What are the endogenous variables.
Matching History and Theory Keynesian Stimulus 1) Keynesian Stimulus – 1930’s 1)Fine tuning in the 1960’s.
UBEA 1013: ECONOMICS 1 CHAPTER 12: AGGREGATE DEMAND-SUPPLY MODEL 12.1 Aggregate Demand Curve 12.2 Aggregate Supply Curve 12.3 Equilibrium & Changes.
1. Why do Macroeconomics? 1. Course Learning Objectives 1.To understand the workings of the modern macroeconomy in the short run 2.We will place emphasis.
John Taylor’s Contributions to Monetary Theory and Policy Federal Reserve Bank of Dallas, October 12-13, 2007 Comments on “Globalization and Monetary Policy”
1 Evidence of time-varying herding behavior from Pacific-Basin stock markets Thomas C. Chiang Marshall M. Austin Chair Professor of Finance LeBow College.
UNCERTAINTY & THE DYNAMICS OF R&D Nick Bloom (Stanford, CEP & NBER) January 2007.
1 DOMESTIC ECONOMIC CONDITIONS Jeff Fuhrer Director of Research Federal Reserve Bank of Boston Equipment Leasing and Finance Association Credit and Collections.
©2012 The McGraw-Hill Companies, All Rights Reserved 1 Chapter 23: Aggregate Demand and Aggregate Supply.
Economics 1490 GROWTH AND CRISIS IN THE WORLD ECONOMY with Professor Dale W. Jorgenson Lecture 06: September 22, 2015 The Great Moderation Harvard University.
Stock market volatility spikes after major shocks Note: CBOE VXO index of % implied volatility, on a hypothetical at the money S&P100 option 30 days to.
Supply Curve Demand Curve What happens to demand if price goes UP? What happens to demand if price goes UP? What happens to supply if price goes UP?
Macro Chapter 10 Dynamic Change, Economic Fluctuations, and the AD-AS Model.
Overview of Remarks  Global backdrop  The current debate on the International Monetary System  Conditions for becoming an international financial center.
1 Frank & Bernanke 4 th edition, 2009 Ch. 13: Aggregate Demand and Aggregate Supply.
ECONOMIC GROWTH Part II. II. PRODUCTIVITY AND ECONOMIC GROWTH.
Supply Curve Demand Curve What happens to demand if price goes UP? What happens to demand if price goes UP? What happens to supply if price goes UP?
Review of Aggregate Supply & Aggregate Demand. Learning Objectives 1.Understand the role of expectations in economic fluctuations 2.Understand how Fiscal.
14-1 Copyright © 2012 Pearson Prentice Hall. All rights reserved. C H A P T E R 14 The Federal Reserve and Monetary Policy Copyright © 2012 Pearson Prentice.
Eastern caution, Western ebullience and global imbalances Marcus Miller and Lei Zhang Warwick University.
Nick Bloom, Macro Topics, Spring 2008 Nick Bloom Micro-heterogeneity & Macro, partial equilibrium.
Module Monetary Policy and the Interest Rate
Topic 8 Aggregate Demand I: Building the IS-LM model
Of 261 Chapter 28 Money, Interest Rates, and Economic Activity.
Comments on Fatas: Automatic Stabilizers Steven Symansky FAD.
Using All the Theory: The Stock Market and the Macroeconomy © 2003 South-Western/Thomson Learning.
Secular Stagnation or Bubbles -- A Theory to Help Us Understand We have seen that Professor Summers believes that secular stagnation is being caused by.
National Income & Business Cycles 0 Ohio Wesleyan University Goran Skosples 10. Oil Shocks of the 1970s and the Great Depression.
Introduction to Fed Tools and Monetary Policy Money and Banking Econ 311 Instructor: Thomas L. Thomas.
ECO Global Macroeconomics TAGGERT J. BROOKS.
Money and Banking Lecture 42.
MODULE 17 Aggregate Demand: Introduction and Determinants
Financial Crisis-cum-Great Recession
Should we reject the natural rate hypothesis?
KRUGMAN’S Economics for AP® S E C O N D E D I T I O N.
Rethinking the Inflation Target
Hysteresis and Fiscal Policy
TOP MOST COMMON ERRORS AP MACRO ECONOMICS
Discussion on “Monetary Policy of the Bank
04/08/2019EC2574 D. DOULOS1 AGGREGATE DEMAND AND AGGREGATE SUPPLY.
Presentation transcript:

Nick Bloom, Macro Topics, Spring 2007 Nick Bloom Great Moderation

Nick Bloom, Macro Topics, Spring 2007 Real output volatility is falling As you saw real output volatility has been falling, with an apparent break-point in the US in mid 1980s Worth noting when look at financial measures: Firm stock returns volatility has risen (Comin & Philippon, 2005) Public firms only, private firm volatility flat (Davis et al. 2007) S&P500 stock index volatility also flat (Bloom, 2006)

Nick Bloom, Macro Topics, Spring 2007 Individual public firm stock volatility is rising Source: Comin and Philippon (2005, NBER MA)

Nick Bloom, Macro Topics, Spring 2007 Source: Bloom (2007) OPEC II Monetary turning point Black Monday* Gulf War I Asian Crisis Russia & LTCM 9/11 Enron Gulf War II Afghanistan JFK assassinated Cuban missile crisis Cambodia, Kent State OPEC I Franklin National Vietnam build-up S&P stock market volatility if flat

Nick Bloom, Macro Topics, Spring 2007 Ben Bernanke “The Great Moderation” Remarks at Eastern Economic Association

Nick Bloom, Macro Topics, Spring 2007 Overview Discusses reason for great moderation Starts by noting Stock & Watson (2002) claim the largest component is good luck Argues that good monetary policy may have played a more important role – shifted Taylor curve in

Nick Bloom, Macro Topics, Spring 2007 The Taylor curve linking output-inflation volatility C (post 2004)

Nick Bloom, Macro Topics, Spring 2007 Bernanke argues Stock & Watson (2002) could erroneously be attributing a shift to “good luck” Better monetary policy may look like less shocks if: Better policy stabilizes expectations (less responsive to shocks), “rational inattention” (Sims, 2003) Reduces the impact of shocks that arise (earlier “shocks” may have actually been induced by bad policy) Changes sensitivity of system to shocks – firms may raise prices less if expect others to But can not be through dynamics (AR coefficients stable)

Nick Bloom, Macro Topics, Spring 2007 Olivier Blanchard and John Simon “The Long and Large Decline in US Output Volatility” Brookings Economic Papers, 2001

Nick Bloom, Macro Topics, Spring 2007 They argue output volatility has been falling for a long time, with the 1970s an abberation

Nick Bloom, Macro Topics, Spring 2007 Decline not just driven by just less recessions

Nick Bloom, Macro Topics, Spring 2007 Volatility has fallen in every G7 country except Japan

Nick Bloom, Macro Topics, Spring 2007 Finishes with a puzzle of what has happened? Evidence is contradictory with no “smoking-gun” cause Recent by Jaimovich and Siu (2007, Stanford mimeo), argue another big factor is demographics: Show in micro & macro data young & old more volatile Show changing demographics in G7 explains ≈ 1/3 drop Open questions: Why has volatility gone down – getting there but still not resolved What are TFP shocks (especially negative TFP) – can we use volatility to get a better handle Do these models hold in other countries?