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Results from the Smets and Wouters (<jats:italic>American Economic Review<\/jats:italic> 2007; <jats:bold>97<\/jats:bold>: 586\u2013606) model estimated on the usual set of macroeconomic time series over the 1964\u20132011 period indicate that (i) the Student's <jats:italic>t<\/jats:italic> specification is strongly favored by the data even when we allow for low\u2010frequency variation in the volatility of the shocks, and (ii)) the estimated degrees of freedom are quite low for several shocks that drive US business cycles, implying an important role for rare large shocks. This result holds even if we exclude the Great Recession period from the sample. We also show that inference about low\u2010frequency changes in volatility\u2014and, in particular, inference about the magnitude of Great Moderation\u2014is different once we allow for fat tails. Copyright \u00a9 2014 John Wiley &amp; Sons, Ltd.<\/jats:p>","DOI":"10.1002\/jae.2395","type":"journal-article","created":{"date-parts":[[2014,5,28]],"date-time":"2014-05-28T08:32:43Z","timestamp":1401265963000},"page":"1031-1052","source":"Crossref","is-referenced-by-count":89,"title":["RARE SHOCKS, GREAT RECESSIONS"],"prefix":"10.1002","volume":"29","author":[{"given":"Vasco","family":"C\u00fardia","sequence":"first","affiliation":[{"name":"Federal Reserve Bank of San Francisco  CA USA"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Marco","family":"Del Negro","sequence":"additional","affiliation":[{"name":"Federal Reserve Bank of New York  NY USA"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Daniel L.","family":"Greenwald","sequence":"additional","affiliation":[{"name":"New York University  NY USA"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2014,5,28]]},"reference":[{"key":"e_1_2_8_2_1","doi-asserted-by":"publisher","DOI":"10.1080\/07474930701220246"},{"key":"e_1_2_8_3_1","unstructured":"AscariG FagioloG RoventiniA.2012.Fat tails distributions and business cycle models. 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