Multimodality in Macro-Financial Dynamics

52 Pages Posted: 20 Nov 2019 Last revised: 5 Dec 2020

See all articles by Tobias Adrian

Tobias Adrian

International Monetary Fund

Nina Boyarchenko

Federal Reserve Bank of New York

Domenico Giannone

Centre for Economic Policy Research (CEPR); Amazon.com

Date Written: November 1, 2019

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.

Keywords: density impulse response, multimodality, nonparametric density estimator

JEL Classification: C14, E17, E37, G01

Suggested Citation

Adrian, Tobias and Boyarchenko, Nina and Giannone, Domenico, Multimodality in Macro-Financial Dynamics (November 1, 2019). FRB of New York Staff Report No. 903, Available at SSRN: https://ssrn.com/abstract=3489435 or http://dx.doi.org/10.2139/ssrn.3489435

Tobias Adrian

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.tobiasadrian.com

Nina Boyarchenko (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Domenico Giannone

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Amazon.com ( email )

Seattle, WA 98144
United States

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