Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210755
Authors: 
Adrian, Tobias
Boyarchenko, Nina
Giannone, Domenico
Year of Publication: 
2019
Series/Report no.: 
Staff Report No. 903
Abstract: 
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.
Subjects: 
density impulse response
multimodality
nonparametric density estimator
JEL: 
C14
E17
E37
G01
Document Type: 
Working Paper

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