Stochastic Volatility and DSGE Models

This paper argues that a specification of stochastic volatility commonly used to analyze the Great Moderation in DSGE models may not be appropriate, because the level of a process with this specification does not have conditional or unconditional moments. This is unfortunate because agents may as a result expect productivity and hence consumption to be inifinite in all future periods. This observation is followed by three ways to overcome the problem.

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Year of publication:	2009-07-07
Authors:	Andreasen, Martin M.
Institutions:	School of Economics and Management, University of Aarhus
Subject:	Great Moderation \| Productivity shocks \| and Time-varying coe¢ cients

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Extent:	application/pdf
Series:	CREATES Research Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	8 pages long
Classification:	E10 - General Aggregative Models. General ; E30 - Prices, Business Fluctuations, and Cycles. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004994215