Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
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.