The Great Moderation and the Relationship between Output Growth and Its Volatility

This study examines the effect of the Great Moderation on the relationship between U.S. output growth and its volatility over the period 1947 to 2006. First, we consider the possible effects of structural change in the volatility process. In so doing, we employ GARCH-M and ARCH-M specifications of the process describing output growth rate and its volatility with and without a one-time structural break in volatility. Second, our data analyses and empirical results suggest no significant relationship between the output growth rate and its volatility, favoring the traditional wisdom of dichotomy in macroeconomics. Moreover, the evidence shows that the time-varying variance falls sharply or even disappears once we incorporate a one-time structural break in the unconditional variance of output starting 1982 or 1984. That is, the integrated GARCH effect proves spurious. Finally, a joint test of a trend change and a one-time shift in the volatility process finds that the one-time shift dominates.

Computer Simulation of Crowd Dynamics and Destructive Crowd Behavior

The social processes that lead to destructive behavior in celebratory crowds can be studied through an agent-based computer simulation. Riots are an increasingly common outcome of sports celebrations, and pose the potential for harm to participants, bystanders, property, and the reputation of the groups with whom participants are associated. Rioting cannot necessarily be attributed to the negative emotions of individuals, such as anger, rage, frustration and despair. For instance, the celebratory behavior (e.g., chanting, cheering, singing) during UConn’s “Spring Weekend” and after the 2004 NCAA Championships resulted in several small fires and overturned cars. Further, not every individual in the area of a riot engages in violence, and those who do, do not do so continuously. Instead, small groups carry out the majority of violent acts in relatively short-lived episodes. Agent-based computer simulations are an ideal method for modeling complex group-level social phenomena, such as celebratory gatherings and riots, which emerge from the interaction of relatively “simple” individuals. By making simple assumptions about individuals’ decision-making and behaviors and allowing actors to affect one another, behavioral patterns emerge that cannot be predicted by the characteristics of individuals. The computer simulation developed here models celebratory riot behavior by repeatedly evaluating a single algorithm for each individual, the inputs of which are affected by the characteristics of nearby actors. Specifically, the simulation assumes that (a) actors possess 1 of 5 distinct social identities (group memberships), (b) actors will congregate with actors who possess the same identity, (c) the degree of social cohesion generated in the social context determines the stability of relationships within groups, and (d) actors’ level of aggression is affected by the aggression of other group members. Not only does this simulation provide a systematic investigation of the effects of the initial distribution of aggression, social identification, and cohesiveness on riot outcomes, but also an analytic tool others may use to investigate, visualize and predict how various individual characteristics affect emergent crowd behavior.