Essays on economic fluctuations

A famous stylized fact of US macroeconomic data is the large decline in volatility since the 1980’s. This observation has been labeled the Great Moderation. The first two chapters investigate the sources of the Great Moderation. In Chapter 1, I use time series methods to relate the Great Moderation to the heterogeneity of sectoral growth rates. Indeed, over the post WWII period, many service sectors have grown faster than the volatile manufacturing sectors. This economic shift into more stable sectors is a potential explanation for the Great Moderation. Chapter 2 is joint with Gregor Bäurle. We use the business cycle accounting procedure elaborated by Chari, Kehoe, and McGrattan (2007) to discriminate between different potential explanations for the Great Moderation. We use a data-rich environment in order to estimate the measurement errors. Chapter 3, which is also joint with Gregor Bäurle, is a technical note on the business cycle accounting procedure. We show how to make the procedure consistent with a wide class of data-generating economies. In Chapter 4, I analyze the implication of the yield curve on the dynamic behavior of the volatilities of stochastic drivers in a prototype sticky price model. I find that the sticky price model with a cost-push shock and time-varying volatilities produces a yield curve which fits well observed US zero coupon bond yields.