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UK macroeconomic volatility: Historical evidence over seven centuries

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journal contribution
posted on 20.09.2018, 15:12 by Vasilios Plakandaras, Rangan Gupta, Mark Wohar
Breaking ground from all previous studies, we estimate a time-varying Vector Autoregression model that examines the time-period 1270–2016 — the entire economic history of the U.K. Focusing on permanent and transitory shocks in the economy, we study the fluctuation in conditional volatilities and time-varying long-run responses of output growth and inflation. Unlike all previous studies that use time invariant linear models, our approach reveals that the pre 1600 period is a turbulent economic period of high volatility that is only repeated in the 20th century. The repeating patterns in the conditional volatilities follow from aggregate supply shocks, while most of the inflation responses follow from aggregate demand shocks. Thus, we uncover that despite the technological growth and the various changes in the structure of the U.K. economy in the last century, the recurring patterns call for an examination of the true impact of the various policies on the economy.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Policy Modeling

Citation

PLAKANDARAS, V., GUPTA, R. and WOHAR, M.E., 2018. UK macroeconomic volatility: Historical evidence over seven centuries. Journal of Policy Modeling, 40 (4), pp.767-789.

Publisher

Elsevier © The Society for Policy Modeling

Version

AM (Accepted Manuscript)

Publisher statement

This paper was accepted for publication in the journal Journal of Policy Modeling and the definitive published version is available at https://doi.org/10.1016/j.jpolmod.2018.04.002.

Acceptance date

23/04/2018

Publication date

2018-05-03

ISSN

0161-8938

Language

en

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