-varying parameter models that incorporate both stochastic volatility and a Heckman-type two-step estimation procedure that deals with …

significantly lower aggregate volatility. This relationship is also highly non-linear starting from a low level of financial … development the reduction in aggregate volatility by financial deepening is far more significant than it is when the financial … spending shocks, preference shocks) on aggregate output and investment, and why this volatility-reducing effect diminishes with …