The Great Moderation in the U.S. economy was accompanied by a widespread increase in the volatility of financial variables. We explore the sources of the divergent patterns in volatilities by estimating a model with time-varying financial rigidities subject to structural breaks in the size of...

We define a measure to be a financial vulnerability if, in a VAR framework that allows for nonlinearities, an impulse to the measure leads to an economic contraction. We evaluate alternative macrofinancial imbalances as vulnerabilities: nonfinancial sector credit, risk appetite of financial...

Maintaining sufficient liquidity in the financial system is vital for financial stability. However, since returns on liquid assets are typically low, individual financial institutions may seek to hold fewer such assets, especially if they believe they can rely on other institutions for liquidity...