The article explores how risk affects the economy by looking at the BAA‐AAA spread. They found that when this spread goes up, it leads to recessions and makes them worse. By analyzing the spread in a model, they discovered that a shock to risk causes a significant drop in output and increases in real‐money balances. This shock explains a big part of output declines in past recessions, including the weak recovery after 9/11 and the major drop during the 2008 financial crisis.