Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175241 
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 804
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
We propose an extended time-varying parameter Vector Autoregression that allows for an evolving relationship between the variances of the shocks. Using this model, we show that the relationship between the conditional variance of GDP growth and the long-term interest rate has become weaker over time in the US. Similarly, the co-movement between the variance of the long-term interest rate across the US and the UK declined over the 'Great Moderation' period. In contrast, the volatility of US and UK GDP growth appears to have become increasingly correlated in the recent past.
Subjects: 
Vector-Autoregressions
Time-Varying parameters
Stochastic Volatility
JEL: 
C15
C32
E32
Document Type: 
Working Paper

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