Claudia Sahm GET MORE MONEY OUT NOW!!!!!+ Your Authors @Claudia_Sahm macro policy expert - she/her - well with bipolar disorder - Sahm rule - my blog: macromomblog.com/ - email: [email protected] Jun. 30, 2020 1 min read + Your Authors

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today’s research unpacks financial market stress in March ... and ties real economy and financial sector ... uncertainty and heterogeneity are central to the story

even if economic stress starts by supply shock, the virus, shutting down economy ... will end up a demand shock too as it travels through financial markets and lower asset prices PS my opinion in US because financial markets led shutdown, demand and supply simultaneously

when central banks are contrained on interest rate policy (as true now) .. downward spiral in markets more likely ... then central bank steps in with unconventional policy (as now) and buys up risky assets ... creates virtuous cycle

all models have many assumptions 👇 ... today’s talk is great example of how you motivate your framework and main findings ... then dig into the math

builds in decision between Fed taking risky assets on its balance sheet vs federal government doing deficit spending .. both with some risk and risk differs across counties, for example, Turkey less fiscal capacity than US

leverage prior to crisis amplifies the negative demand shock .. and increases risk to Fed asset purchases (me: leverage amplifies shocks, good or bad) ... here: businesses bankruptcies follow

timely

summary of risk channel ...


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