Oil and the Great Moderation

We assess the extent to which the period of great U.S. macroeconomic stability since the mid-1980s can be accounted for by changes in oil shocks and the oil share in GDP. To do this we estimate a DSGE model with an oil-producing sector before and after 1984 and perform counterfactual simulations. We nest two popular explanations for the Great Moderation: (1) smaller (non-oil) real shocks; and (2) better monetary policy. We find that the reduced oil share accounted for as much as one-third of the inflation moderation and 13% of the growth moderation, while smaller oil shocks accounted for 11% of the inflation moderation and 7% of the growth moderation. This notwithstanding, better monetary policy explains the bulk of the inflation moderation, while most of the growth moderation is explained by smaller TFP shocks.Monetary policy ; Petroleum products - Prices ; Business cycles

Do expectations matter? The Great Moderation revisited

We examine the role of expectations in the Great Moderation episode. We derive theoretical restrictions in a New-Keynesian model and test them using measures of expectations obtained from survey data, the Greenbook and bond markets. Expectations explain the dynamics of inflation and of interest rates but their importance is roughly unchanged over time. Systems with and without expectations display similar reduced form characteristics. Including or excluding expectations hardly changes the economic explanation of the Great Moderation. Results are robust to changes in the structure of the empirical model.Indeterminacy, Expectations, Term structure, Structural VARs, Sunspot

Has the Business Cycle Changed and Why?

From 1960-1983, the standard deviation of annual growth rates in real GDP in the United States was 2.7%. From 1984-2001, the corresponding standard deviation was 1.6%. This paper investigates this large drop in the cyclical volatility OF real economic.activity. The paper has two objectives. The first is to provide a comprehensive characterization of the decline in volatility using a large number of U.S. economic time series and a variety of methods designed to describe time-varying time series processes. In so doing, the paper reviews the literature on the moderation and attempts to resolve some of its disagreements and discrepancies. The second objective is to provide new evidence on the quantitative importance of various explanations for this 'great moderation.' Taken together, we estimate that the moderation in volatility is attributable to a combination of improved policy (20-30%), identifiable good luck in the form of productivity and commodity price shocks (20-30%), and other unknown forms of good luck that manifest themselves as smaller reduced-form forecast errors (40-60%).

Metacognitive self-reflectivity moderates the relationship between distress tolerance and empathy in schizophrenia

Deficits in empathy seen in schizophrenia are thought to play a major role in the social dysfunction seen in the disorder. However, little work has investigated potential determinants of empathic deficits. This study aimed to fill that gap by examining the effects of two variables on empathy – distress tolerance and metacognitive self-reflectivity. Fifty-four people with schizophrenia-spectrum disorders receiving services at an urban VA or community mental health center were assessed for empathy, metacognition, and distress tolerance. Bivariate correlations and moderation methods were used to ascertain associations amongst these variables and examine interactions. Results revealed that, against hypotheses, empathy was not related at the bivariate level to either distress tolerance or metacognitive self-reflectivity. However, consistent with hypotheses, moderation analyses revealed that participants with higher self-reflectivity showed no relationship between distress tolerance and empathy, while those with lower self-reflectivity showed a relationship such that reduced ability to tolerate distress predicted reduced empathy. Taken together, results of this study suggest that lack of distress tolerance can negatively affect empathy in people with schizophrenia with lesser capacity for metacognitive self-reflection; thus, fostering self-reflectivity may help overcome that negative impact. Future work is needed investigating the impact of metacognitively-tailored interventions on empathy in this population

Is the Great Moderation over? an empirical analysis

The economy of the United States was markedly less volatile in the past two to three decades than in prior periods. The nation enjoyed long economic expansions in each of the last three decades, interrupted by recessions in 1990-91 and 2001 that were mild by historical standards. While it has proven difficult to conclusively pinpoint the causes of the reduced volatility, candidates include structural changes in the economy, better monetary policy, and smaller shocks (good luck). Many economists and policymakers came to view lower volatility--the Great Moderation--as likely to be permanent. ; More recently, the severity of the recession that started in late 2007 has led some observers to conclude the Great Moderation is over. The recession produced declines in economic activity steeper than in the sharp recessions of the 1950s, 1970s, and early 1980s. ; However, the occurrence of a sharp recession does not necessarily mean variability has returned to pre-Great Moderation levels or that the Great Moderation is over. For example, the recession may have produced a more modest rise in volatility that could be temporary. Whether any rise in volatility is more likely temporary than permanent will depend on the cause of the rise in volatility. An increase in volatility due to structural changes in the economy or monetary policy might be permanent. But an increase in volatility driven by larger shocks might prove temporary. ; Clark conducts a detailed statistical analysis of the putative rise in volatility and its sources to assess whether the Great Moderation is over. He concludes that, over time, macroeconomic volatility will likely undergo occasional shifts between high and low levels, with low volatility the norm.

Oil and the great moderation

Incluye bibliografíaWe assess the extent to which the great US macroeconomic stability since the mid-1980s can be accounted for by changes in oil shocks and the oil share in GDP. To do this we estimate a DSGE model with an oil-producing sector before and after 1984 and perform counterfactual simulations. We nest two popular explanations for the Great Moderation: (1) smaller (non-oil) real shocksand (2) better monetary policy. We find that the reduced oil share accounted for as much as one-third of the inflation moderation, and 13% of the growth moderation, while smaller oil shocks accounted for 11% of the inflation moderation and 7% of the growth moderation. This notwithstanding, better monetary policy explains the bulk of the inflation moderation, while most of the growth moderation is explained by smaller TFP shock

The “Great Moderation” and the Monetary Transmission Mechanism in Chile

This paper analyzes the significant reduction in the volatility of output growth and inflation seen in the Chilean economy in the present decade. This reduced volatility, sometimes called the “great moderation,” coincides with several important changes to the Chilean macroeconomic framework, including the establishment of a full-fledged inflation targeting regime for monetary policy and a rule based on a target for the structural fiscal surplus. The paper examines the impact of these changes on the monetary transmission mechanism and explores how the “great moderation” has been affected by economic shocks and by the endogenous response of policy as reflected in the monetary transmission mechanism. The paper also reports results of a monetary vector autoregression model that finds important changes in the way shocks are transmitted to the Chilean economy.

Vector Autoregression Analysis and the Great Moderation

Most analyses of the U.S. Great Moderation have been based on VAR methods, and have consistently pointed toward good luck as the main explanation for the greater macroeconomic stability of recent years. Using data generated by a New-Keynesian model in which the only source of change is the move from passive to active monetary policy, we show that VARs may misinterpret good policy for good luck. In particular, we detect significant breaks in estimated VAR innovation variances, although in the data generating process the volatilities of the structural shocks are constant across policy regimes. Counterfactual simulations, structural and reduced-form, point toward the incorrect conclusion of good luck. Our results cast doubts on the existing notion that VAR evidence is inconsistent with the good policy explanation of the Great Moderation.

Business Cycle Moderation - Good Policies or Good Luck: Evidence and Explanations for the Euro Area

Economic fluctuations in most of the industrialised world have for over the past 30 years been characterised by declining volatility. This decline has also been a trait witnessed for output fluctuations in the Euro Area. This paper has two objectives. The first is to provide a comprehensive characterisation of the decline in volatility using a large number of Euro area economic time series and a variety of methods designed to describe the time-varying time series processes. The second objective is to provide new evidence on the quantitative importance of various explanations for this ‘great moderation’. This paper focuses on the central elements in the literature contending why real output growth has stabilised. Such factors include shifts in the structure of the economy, improved policies, and a ‘good luck’ factor. Further, this paper goes on to investigate whether cross-country linkages in growth have shifted, perhaps in a way that can help rationalise the stabilisation in output. Taken together, the moderation in volatility is attributable to a combination of improved policy (around 5 - 30 percent) and identifiable forms of good luck that manifest themselves as smaller reduced-form forecast errors (40 percent).Output Volatility, Monetary Policy, International shocks.

Nuclear light bulb

The nuclear light bulb engine is a closed cycle concept. The nuclear light bulb concept provides containment by keeping the nuclear fuel fluid mechanically suspended in a cylindrical geometry. Thermal heat passes through an internally cooled, fused-silica, transparent wall and heats hydrogen propellant. The seeded hydrogen propellant absorbs radiant energy and is expanded through a nozzle. Internal moderation was used in the configuration which resulted in a reduced critical density requirement. This result was supported by criticality experiments. A reference engine was designed that had seven cells and was sized to fit in what was then predicted to be the shuttle bay mass and volume limitations. There were studies done of nozzle throat cooling schemes to remove the radiant heat. Elements of the nuclear light bulb program included closed loop critical assembly tests done at Los Alamos with UF6 confined by argon buffer gas. It was shown that the fuel region could be seeded with constituents that would block UV radiation from the uranium plasma. A combination of calculations and experiments showed that internal moderation produced a critical mass reduction. Other aspects of the research are presented