The Great Moderation in the U.S. economy was accompanied by a widespread increase in the volatility of financial … volatility slowdown in real and nominal variables and in shaping the transmission mechanism of financial shocks. Our model … accounts for the increase in the volatility of financial variables through larger financial shocks, but the vulnerability of …

We study the effects of stock market volatility on risk-taking and financial crises by constructing a cross …-country database spanning up to 211 years and 60 countries. Prolonged periods of low volatility have strong in-sample and out …-of-sample predictive power over the incidence of banking crises and can be used as a reliable crisis indicator, whereas volatility itself …