Great moderation or "Will o' the Wisp"? A time-frequency decomposition of GDP for the US and UK

P.M. Crowley, A. Hughes Hallett

    Research output: Contribution to journalArticlepeer-review

    12 Citations (Scopus)


    In this paper the relationship between the growth of real GDP components at different cycle lengths is explored in the frequency domain using discrete wavelet analysis. This analysis is done for both the US and the UK using quarterly data, and the results reveal interesting differences between the two countries. One of the key findings is that the "great moderation" shows up only at certain frequencies, and not in all components of real GDP. A second result is that the great moderation appears to have shifted cyclical power from shorter and business cycles to long cycles, which has important implications for both policy formulation and the probability of less frequent but more severe economic crises. We use these results to explain why the incidence of the great moderation has been so ephemeral across GDP components, countries and time periods. This also explains why it has been so hard to detect periods of moderation (or otherwise) reliably in the aggregate data.
    Original languageEnglish
    Pages (from-to)82-97
    Number of pages16
    JournalJournal of Macroeconomics
    Early online date21 Feb 2015
    Publication statusPublished - Jun 2015


    • Business cycles
    • Growth cycles
    • Economic growth
    • Time–frequency domain
    • Discrete wavelet analysis
    • Volatility


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