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A1660
Title: A global perspective on the Great Moderation-Great Recession interconnection September 2015 Authors:  Claudio Morana - Universita di Milano Bicocca (Italy) [presenting]
Fabio C Bagliano - Universita di Torino and CeRP-Collegio Carlo Alberto (Italy)
Abstract: A large-scale model of the global economy is used to investigate the structural determinants of the Great Moderation and the transition to the Great Recession (1986-2010). Beside the global economy perspective, the model presents the novel feature of a broad range of included financial variables and risk factors measures. The results point to the relevance of various mechanisms related to the global monetary policy stance (Great Deviation), financial institutions' risk taking behavior (Great Leveraging) and global imbalances (savings glut), in shaping aggregate fluctuations. There is contribution to the literature on early warning indicators, assessing the information content of risk factor innovations for the prediction of the timing and depth of the Great Recession and the early phase of the Euro area sovereign debt crisis.