Bayesian learning

Learning and the Great Moderation

Version Date: 
Jul 2009

We study a stylized theory of the volatility reduction in the U.S. after 1984 - the Great Moderation - which attributes part of the stabilization to less volatile shocks and another part to more difficult inference on the part of Bayesian households attempting to learn the latent state of the economy.

Report file: 
PDF icon Download the paper (298.2 KB)