Due to the euro area sovereign debt crisis, recovery from the Great Recession has not proceeded at a similar pace worldwide, with Europe still lagging behind. The severity of the recession and the sizeable increase in macroeconomic fluctuations ensued by the financial crisis have led analysts and scholars to question whether the prolonged period of subdued macroeconomic volatility, known as the Great Moderation, has come to an end.
Understanding the causes of the Great Recession and the interrelation between the overall favorable macroeconomic conditions, the financial crisis, and the third oil price shock is mandatory not only to assess whether higher macroeconomic uncertainty will persistently affect the global economy in the future, but also to uncover the early warning signals of deteriorating macro-financial conditions, which were neglected while imbalances were growing.
The investigation of these issues is part and parcel of the RAstaNEWS project. In the first issue of this special two-part newsletter, we introduce papers which specifically deal with econometric modeling of large-scale macro-financial systems, the early extraction of latent information on growing imbalances, and the assessment of the recessionary effects of the third oil-price shock.