The Coffee Crisis
“The Great Moderation, Dead or Alive?” by Diego Comin:
An Analysis
Ann Beecham
MBA 6008 Global Economics
3660 South Ridge Circle
Titusville, Florida 32796
(321) 745-7260
abeecham@capellauniversity.edu
Dr. Michael Polakoff
Introduction
In 2011, Diego Comin, Associate Professor of Business Administration at Harvard Business School, revised his 2009 case study on the Great Moderation (reproduced by permission for Capella University, 2011). The case explores whether or not the Great Moderation, defined by investopedia.com as “the period of decreased macroeconomic volatility experienced in the United States since the 1980’s [during which] the standard deviation of quarterly real GDP declined by half, and the standard deviation of inflation declined by two-thirds (para. 1)” is still in effect. This paper will use evidence from research in a draft by Pancrazi and Vukotic (2011) that proposes “macroeconomic variables in the last thirty years have not only experienced a reduction in their overall volatility, but also an increase in their persistence (p.2).” The 2011 research paper also purports that “by using a New-Keynesian macroeconomic model...the responsiveness of output variance to changes in the monetary policy decreases with an increase in the persistence of technology (p.2).” The result, according to Pancrazi and Vukotic, is an “overestimate” of the monetary influence and authority to “smooth out the real economic dynamics (p.2).”
The Great Moderation and the The Great Recession.
Comin, in “The Great Moderation, Dead or Alive?” (Capella, 2011), quotes Ben Bernanke, Chairman of the Federal Reserve: "reduced macroeconomic volatility has numerous benefits. Lower volatility of inflation improves market functioning, makes economic planning easier, and reduces the resources devoted to hedging inflation risks. Lower volatility of output tends to imply more
An Analysis
Ann Beecham
MBA 6008 Global Economics
3660 South Ridge Circle
Titusville, Florida 32796
(321) 745-7260
abeecham@capellauniversity.edu
Dr. Michael Polakoff
Introduction
In 2011, Diego Comin, Associate Professor of Business Administration at Harvard Business School, revised his 2009 case study on the Great Moderation (reproduced by permission for Capella University, 2011). The case explores whether or not the Great Moderation, defined by investopedia.com as “the period of decreased macroeconomic volatility experienced in the United States since the 1980’s [during which] the standard deviation of quarterly real GDP declined by half, and the standard deviation of inflation declined by two-thirds (para. 1)” is still in effect. This paper will use evidence from research in a draft by Pancrazi and Vukotic (2011) that proposes “macroeconomic variables in the last thirty years have not only experienced a reduction in their overall volatility, but also an increase in their persistence (p.2).” The 2011 research paper also purports that “by using a New-Keynesian macroeconomic model...the responsiveness of output variance to changes in the monetary policy decreases with an increase in the persistence of technology (p.2).” The result, according to Pancrazi and Vukotic, is an “overestimate” of the monetary influence and authority to “smooth out the real economic dynamics (p.2).”
The Great Moderation and the The Great Recession.
Comin, in “The Great Moderation, Dead or Alive?” (Capella, 2011), quotes Ben Bernanke, Chairman of the Federal Reserve: "reduced macroeconomic volatility has numerous benefits. Lower volatility of inflation improves market functioning, makes economic planning easier, and reduces the resources devoted to hedging inflation risks. Lower volatility of output tends to imply more
References: Capella University. (Eds.). (2011). MBA6008: Global Economic Environment. New York, NY: McGraw-Hill. Lines, T., & Tickell, S. (2003, May 1). Walk the Talk, Oxfam International Briefing Paper, May, 2003. Oxfam International | Working together to find lasting solutions to poverty and injustice. Retrieved May 5, 2012, from www.oxfam.org/sites/www.oxfam.org/files/walk.pdf Osorio, N. (2002). ICO.org Documents/Global Crisis. International Coffee Organization. Retrieved May 4, 2012, from dev.ico.org/documents/globalcrisise.pdf Osorio, N. (2003). ICO.org Documents/G-8. International Coffee Organization. Retrieved May 4, 2012, from dev.ico.org/documents/g8e.pdf Osorio, N. (2004). ICO.org Documents/UNCTAD. International Coffee Organization. Retrieved May 4, 2012, from dev.ico.org/documents/UNCTAD.pdf Prince, M. (2003, December 3). CoffeeGeek - Coffee Crisis:TechnoServe Releases Fact-Based Industry Analysis. CoffeeGeek - News, Reviews, Opinion and Community for Coffee and Espresso. Retrieved May 5, 2012, from http://coffeegeek.com/resources/pressreleases/technoservedec42003