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MULTIMODALITY IN MACROFINANCIAL DYNAMICS

Tobias Adrian (), Nina Boyarchenko and Domenico Giannone ()

International Economic Review, 2021, vol. 62, issue 2, 861-886

Abstract: We estimate the evolution of the conditional joint distribution of economic and financial conditions. Although 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 macrofinancial intermediary model with occasionally binding financial constraints.

Date: 2021
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https://doi.org/10.1111/iere.12501

Related works:
Working Paper: Multimodality in Macro-Financial Dynamics (2020) Downloads
Working Paper: Multimodality in Macro-Financial Dynamics (2019) Downloads
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International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

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