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Event Recap

The Macro Financial Modeling Initiative hosted its second MFM Summer Session for Young Scholars on June 18–22, 2017 in Bretton Woods, New Hampshire, at the site of the historic 1944 United Nations Monetary and Financial Conference.

The session was designed for those interested in building macroeconomic models with enhanced linkages to the financial sector. It was open to doctoral students in economics and related fields as well as early-career professionals working in this area.

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MFM Summer Camp 2017

Agenda

Monday, June 19, 2017
Welcome
Liquidity and Segmented Markets

Illiquid assets are subject to private information, and search or network trading frictions.  In addition, illiquid assets are often traded by specialists in segmented markets, and they appear to earn a return premium on average. This lecture will review research on asset illiquidity and market segmentation and will discuss fruitful directions for future work.

Related Papers:

Andrea Eisfeldt, UCLA Anderson School of Business
Financial Networks and Intermediation: Network and Search Models
Orientation and Lunch
Lars Peter Hansen, The David Rockefeller Distinguished Service Professor in Economics and Statistics, the Kenneth C. Griffin Department of Economics and the Booth School of Business; Director of BFI's Macro Finance Research Program
Andrew W. Lo, Massachusetts Institute of Technology Sloan School of Management
Financial Crises and Asset Prices

The talk will explore the behavior of asset prices surrounding historical financial crises.

Related papers:

Financial Crises and Risk Premia

How Credit Cycles Across a Financial Crisis

Financial Intermediaries and the Cross-Section of Asset Returns

Tyler Muir, UCLA Anderson School of Business
Macroeconomic Models with Financial Intermediation

The lecture will focus on macroeconomic models with financial intermediation. It will start by explaining how these models (when solved non-linearly) generate time-varying precautionary behavior for financial intermediaries, and then it will explore how this feature helps these models capture important aspects of business cycle fluctuations and financial crises.

Related papers:

Cochrane, John, “Macro-Finance,” Review of Finance, 1-47, 2017
Atkeson, Andrew, and Patrick J. Kehoe. “On the Need for a New Approach to Analyzing Monetary Policy.” Working Paper. National Bureau of Economic Research, August 2008.
Bocola, Luigi. “The Pass-Through of Sovereign Risk.” Journal of Political Economy 124, no. 4 (July 7, 2016): 879-926.
Bocola, Luigi, and Guido Lorenzoni. “Financial Crises and Lending of Last Resort in Open Economies.” Working paper. Northwestern University, 2017.
Luigi Bocola, Northwestern University and the Federal Reserve Bank of Minneapolis
Comparative Valuation Dynamics in Models with Financing Restrictions
Lars Peter Hansen, The David Rockefeller Distinguished Service Professor in Economics and Statistics, the Kenneth C. Griffin Department of Economics and the Booth School of Business; Director of BFI's Macro Finance Research Program
Tuesday, June 20, 2017
Big Data, Model Complexity, and Interpretability, Machine Learning and Finance
Sanmay Das, Washington University in St. Louis
The International Monetary System: History and Theory

This talk will present a brief review of the history of the International Monetary System (IMS) and related stylized facts from the gold-exchange standard of the 1920s to the present floating exchange rate system as well as a theory of the IMS.

Related paper:

A Model of the International Monetary System

Matteo Maggiori, Harvard University
Keynote Luncheon
Mr. Melamed offered rich historical background on the Bretton Woods monetary policy conference and the development of the futures market. Read the full transcript of his talk here.
Leo Melamed, Chairman Emeritus; Chairman, CME Group, Inc.; Melamed & Assoc., Inc.
Dynamics of Housing Debt in the Recent Boom and Bust

This talk will present an overview of the evolution of home purchase debt, homeownership, and measures of debt burden during the recent housing boom and Great Recession. The research shows that the housing boom was shared across the entire income distribution with small cross-sectional differences in the flow and stock of debt. Homeownership increased for all households except for those with the lowest incomes, and house prices were the main driver of the rise in debt-to-income at origination. There are also no significant changes in loan-to-value ratios at origination during the boom. The results are most consistent with the view that the main drivers of mortgage debt during this period were rising home values and expectations of increasing prices.

Related paper:

Dynamics of Housing Debt in the Recent Boom and Bust

Antoinette Schoar, Massachusetts Institute of Technology
DSGE Model Estimation - Progress and Challenges

This talk will review recent advances in the literature on the econometric analysis of dynamic stochastic general equilibrium models.

Related papers:

Macroeconomic Dynamics Near the ZLB: A Tale of Two Countries

Tempered Particle Filtering

Bayesian Estimation of DSGE Models

Identifying Long-Run Risks: A Bayesian Mixed Frequency Approach

Frank Schorfheide, University of Pennsylvania
Measuring the Dark Matter in Asset Pricing Models
Hui Chen, MIT Sloan School of Management
Wednesday, June 21, 2017
Research Challenges Faced by the Private Sector
Lisa Emsbo-Mattingly, Fidelity
Blu Putnam, CME Group
Alex Levkov, Deutsche Bank
Moderator: Andrew W. Lo, Massachusetts Institute of Technology Sloan School of Management
Student Presentations
Thursday, June 22, 2017
Breakfast and Poster Sessions
Research Challenges Faced by Regulators
Rohan Churm, Bank of England
Laura Kodres, International Monetary Fund
Akhtar Siddique, Office of the Comptroller of the Currency
Moderator: Lars Peter Hansen, David Rockefeller Distinguished Service Professor, University of Chicago