On the continuation of the great moderation : new evidence from G7 countries

This paper employs a Markov regime-switching approach to investigate whether the Great Moderation is over since the start of the late 2000s recession. The results confirm that the recent financial crisis did cause a simultaneous high-volatility period among the G7 countries. However, the financial crisis may not mark the end of the Great Moderation. There is strong evidence that each G7 country has again returned to the low-variance state since 2009 or the beginning of 2010. -- output fluctuations; financial crisis; regime switching