This paper investigates what has caused output and inflation volatility to fall in the US
using a small scale structural model using Bayesian techniques and rolling samples. There
are instabilities in the posterior of the parameters describing the private sector, the policy
rule and the standard deviation of the shocks. Results are robust to the specification of
the policy rule. Changes in the parameters describing the private sector are the largest,
but those of the policy rule and the covariance ...
This paper investigates what has caused output and inflation volatility to fall in the US
using a small scale structural model using Bayesian techniques and rolling samples. There
are instabilities in the posterior of the parameters describing the private sector, the policy
rule and the standard deviation of the shocks. Results are robust to the specification of
the policy rule. Changes in the parameters describing the private sector are the largest,
but those of the policy rule and the covariance matrix of the shocks explain the changes most.
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