Discussion paper

DP15088 Multimodality in Macro-Financial Dynamics

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.


Boyarchenko, N, T Adrian and D Giannone (2020), ‘DP15088 Multimodality in Macro-Financial Dynamics‘, CEPR Discussion Paper No. 15088. CEPR Press, Paris & London. https://cepr.org/publications/dp15088