Multimodality in macro-financial dynamics

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 903

Classification and Topics

• Classification: Wirtschaft ; Semiparametric and Nonparametric Methods: General ; General Aggregative Models: Forecasting and Simulation: Models and Applications ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Financial Crises
• Subject: density impulse response ; multimodality ; nonparametric density estimator

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Adrian, Tobias ; Boyarchenko, Nina ; Giannone, Domenico
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/210755
• Last update: 10.03.2025, 11:41 AM CET