An Assessment of UK Macroeconomic Volatility: Historical Evidence Using Over Seven Centuries of Data

29 Pages Posted: 26 Nov 2018

See all articles by Vasilios Plakandaras

Vasilios Plakandaras

Democritus University of Thrace

Rangan Gupta

University of Pretoria - Department of Economics

Mark E. Wohar

University of Nebraska at Omaha

Date Written: April 20, 2018

Abstract

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 the approach of 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 to the economy.

Keywords: Time-Varying VAR, Macroeconomic Shocks

JEL Classification: C32

Suggested Citation

Plakandaras, Vasilios and Gupta, Rangan and Wohar, Mark E., An Assessment of UK Macroeconomic Volatility: Historical Evidence Using Over Seven Centuries of Data (April 20, 2018). Available at SSRN: https://ssrn.com/abstract=3275916 or http://dx.doi.org/10.2139/ssrn.3275916

Vasilios Plakandaras (Contact Author)

Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Mark E. Wohar

University of Nebraska at Omaha ( email )

Department of Economics
6708 Pine Street MH 332S
Omaha, NE 68182
United States
402-554-3712 (Phone)
402-554-2853 (Fax)

HOME PAGE: http://cba.unomaha.edu/faculty/mwohar/WEB/homepage.html

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
137
PlumX Metrics