On the Continuation of the Great Moderation

Abstract

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 con rm that the recent nancial crisis did cause a simultaneous high-volatility period among the G7 countries. However, the nancial 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.