On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates
Federal Reserve Bank of New York
Multimodality in Macro-Financial Dynamics
We estimate the evolution of the conditional joint distribution of economic and financial conditions in the United States, documenting a novel empirical fact: while the joint distribution is approximately Gaussian during normal periods, sharp tightenings of financial conditions lead to the emergence of additional modes—that is, multiple economic equilibria. Although the U.S. economy has historically reverted quickly to a “good” equilibrium after a tightening of financial conditions, we conjecture that poor policy choices under these circumstances could also open a pathway to a “bad” equilibrium for a prolonged period. We argue that such multimodality arises naturally in a macro-financial intermediary model with occasionally binding intermediary constraints.
Cite this item
Tobias Adrian & Nina Boyarchenko & Domenico Giannone, Multimodality in Macro-Financial Dynamics, Federal Reserve Bank of New York, Staff Reports 903, 01 Nov 2019.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- G01 - Financial Economics - - General - - - Financial Crises
Keywords: density impulse response; multimodality; nonparametric density estimator
This item with handle RePEc:fip:fednsr:903
is also listed on EconPapers
For corrections, contact Amy Farber ()