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Multimodality in Macro-Financial Dynamics

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  • Adrian, Tobias
  • Boyarchenko, Nina
  • Giannone, Domenico

Abstract

We estimate the evolution of the conditional joint distribution of economic and financial conditions. While the joint distribution is approximately Gaussian during normal periods, sharp tightenings of financial conditions lead to the emergence of additional modes. The U.S. economy has historically resolved quickly to the "good" mode, but we conjecture that poor policy choices could lead to prolonged periods of multimodality. We argue that multimodality arises naturally in a macro-financial intermediary model with occasionally binding intermediary constraints.

Suggested Citation

  • Adrian, Tobias & Boyarchenko, Nina & Giannone, Domenico, 2020. "Multimodality in Macro-Financial Dynamics," CEPR Discussion Papers 15088, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15088
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    References listed on IDEAS

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    1. Tobias Adrian & Fernando M. Duarte, 2016. "Financial vulnerability and monetary policy," Staff Reports 804, Federal Reserve Bank of New York.
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    Cited by:

    1. Mark Gertler & Nobuhiro Kiyotaki & Andrea Prestipino, 2020. "Credit Booms, Financial Crises, and Macroprudential Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 8-33, August.

    More about this item

    JEL classification:

    • 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

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