This paper investigates the sources of significant shifts in the volatility of U.S. macroeconomic variables over the postwar period. The authors propose an estimation method for DSGE models that allows for time-varying volatility in the structural innovations. They apply this method to a large-scale business cycle model and find that investment-specific technology shocks account for the sharp decline in volatility observed in the last two decades. The study also reveals that the Great Moderation, characterized by a reduction in the standard deviation of output and other macroeconomic variables since the mid-1980s, is largely driven by a decrease in the volatility of investment-specific technology shocks. The authors interpret these shocks as proxies for investment financial frictions, which have declined at the beginning of the 1980s, particularly in mortgage financing. The paper provides a detailed analysis of the model's parameters and volatility processes, and discusses the robustness of the findings to alternative specifications.This paper investigates the sources of significant shifts in the volatility of U.S. macroeconomic variables over the postwar period. The authors propose an estimation method for DSGE models that allows for time-varying volatility in the structural innovations. They apply this method to a large-scale business cycle model and find that investment-specific technology shocks account for the sharp decline in volatility observed in the last two decades. The study also reveals that the Great Moderation, characterized by a reduction in the standard deviation of output and other macroeconomic variables since the mid-1980s, is largely driven by a decrease in the volatility of investment-specific technology shocks. The authors interpret these shocks as proxies for investment financial frictions, which have declined at the beginning of the 1980s, particularly in mortgage financing. The paper provides a detailed analysis of the model's parameters and volatility processes, and discusses the robustness of the findings to alternative specifications.