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On August 1-4, 2022, the Macro Finance Research Program (MFR), under the auspices of the Becker Friedman Institute (BFI), hosted the 2022 MFR Summer Session for Young Scholars for PhD students working on their dissertations at the interplay of macroeconomics and finance.

Event Summary

Beyond the global financial crisis: MFR’s 2022 Summer Session introduces young scholars to the next frontiers of macro finance research

While working as a research analyst on the Federal Reserve Bank of New York’s macroeconomic team, Cindy Chung recognized how often she and her colleagues were considering the financial sector when developing forecasting models for monetary policy events. Macroeconomic research, which has long developed in isolation from the markets, underwent a reckoning during the global financial crisis. Economists and investors alike were largely blindsided by the widespread repercussions of the real estate market’s collapse.

“That’s what triggered my interest,” Chung, a second-year Ph.D. student at Stanford University, said. “Policymakers were focused on this intersection.”

Engaging young scholars like Chung who are interested in the links between the macroeconomy and the financial sector lies at the core of the Summer Session for Young Scholars. The conference, hosted by UChicago’s Macro Finance Research Program, motivated Chung and 40 of her peers from more than 20 doctoral programs around the world to travel to campus last month for a week-long “summer camp.” The conference is designed to deepen the young scholars’ modeling skills and knowledge about how to look under the hood of the macroeconomy and investigate its interconnections with the financial sector. The students also gain a unique opportunity to network with like-minded peers and learn from leading scholars in the field.

            While the global financial crisis launched a precursor to the MFR and its Summer Session for Young Scholars, MFR Director Lars Peter Hansen has seen substantial changes in the range of topics that are explored in frontier macro finance research. The broad reach of the field was reflected in the presentations by a dozen scholars working at the forefront of macro finance. Hansen observed that this year’s summer session was “truly eclectic,” exposing emerging scholars to a range of disruptive influences, new tools, and a variety of emerging topics in the macro finance frontier.

Hansen’s original interest in summer programs for young scholars started after seeing the success of the summer programs that brought together emerging scholars and distinguished scientists from around the world at the Woods Hole Oceanographic Institution in Massachusetts. “Of course, macro finance is different from oceanography,” Hansen said. “But the intellectual construct implemented at Woods Hole is an excellent one to support important conversations among researchers of different vintages.”

While Hansen’s own presentation focused on innovative ways to model uncertainty and its consequences for markets and policy, he remarked that the full array of sessions included “fascinating presentations on how to use models and evidence to confront research and policy questions on topics such as inflation, monetary policy, financial intermediation, market structure, information capital, cryptocurrencies and climate change.” “There was a continual back and forth between models and evidence that provided a richness to the intellectual exchanges, which will set the stage for the emerging scholars to make modeling advances in the future that are even more empirically grounded,” Hansen said.

Ralph Koijen, a member of the Macro Finance Research program advisory committee, also offered his perspective on how the macro finance field has changed and grown over the fifteen years of his research career. In addition to the extensive empirical and theoretical literature exploring the role of intermediaries in asset pricing and macro finance, Koijen pointed to the study of crises such as the European sovereign debt crisis and the COVID-19 pandemic including policy responses and their potency as active research areas in macro finance. He also emphasized the important new insights that have emerged from survey evidence on beliefs and empirical evidence on portfolio holdings of institutions and investors, evidence that he featured in his own research.

In his presentation designed to engage students in using widely accessible data to answer new questions, Koijen demonstrated how he leverages portfolio holdings data into estimating models to examine investor behavior changes in markets where demand is often inelastic. “Models tend to have predictions about portfolio choice and how investors change their portfolios, but we typically haven’t used portfolio data to test these models,” he said. Koijen aims to answer investor behavior and monetary policy questions about large shifts in holdings by single groups of investors, such as when “green” investors move toward environmentally friendly stocks.

Yueran Ma said that during her Ph.D. program at Harvard it became evident to her that “macroeconomics tackles many interesting and broad questions,” but she also recognized that some classic frameworks and foundational assumptions came from researchers’ deductive reasoning with relatively little empirical guidance. Finance offers a rich set of institutional knowledge about how firms, individuals, and markets operate in practice. “Thus, research in macro finance can facilitate the integration of empirical information about economic activities and macroeconomic inquiries,” Ma said.

In her presentation, Ma encouraged students to bring data to the evolving notion of “perfect rationality” in key market actors, such as households. Households experience uncertainty about their financial future and make decisions based on personal expectations. “The boom-bust cycle of the mid-2000s, where a lot of people really believed that house prices would go up forever, has created a revival in understanding how people actually form expectations,” Ma said. Ma’s work uses empirical evidence to inform new expectation formation models that allow economic analysis to deviate from long-held notions of perfect rationality.

This year’s conference also showed how macro financial thinking is advancing into new territory. Presentations by the dozen scholars working at the forefront of macro finance introduced the young scholar participants to a range of disruptive influences, new tools, and emerging frontiers.

  • Hansen introduced the scholars to how they can better confront the myriad types of uncertainties that they will face in their research through the lens of climate change. He explored the trade-offs they must weigh given uncertainty about environmental and economic impacts, the economic tools used to anticipate and prepare for these uncertainties, and even how to consider the public and policymakers, largely uncomfortable with uncertainty when there are limits to our understanding. “In light of this complexity, we don’t want to throw up our hands,” Hansen said. “We want to figure out how to modify models in such a way as to incorporate uncertainty in broader terms.”
  • Harald Uhlig discussed the emergence of private cryptocurrencies and central bank digital currencies. He said the pricing of private cryptocurrencies like Bitcoin was “tricky” because they don’t fall neatly into asset pricing models, and large privately issued cryptocurrencies will create “competition and headaches” for central banks. He also explored the mounting pressure for central banks to issue their own digital currencies and outlined the critical factors (price stability-monetary trust-efficiency) they will need to balance.
  • John Cochrane examined inflation, a dormant subject for economists until recently. “We need a theory of inflation under interest rate targets because that’s what the Fed controls,” Cochrane argued, illuminating the fiscal theory of price level tool as a means for exploring monetary and fiscal characteristics of inflation.
  • Fernando Alvarez of UChicago discussed computational strategies for modeling decision-making using mean-field games, which help identify the behavior of related actors within large populations.
  • Robert Shimer introduced a modeling framework for thinking about random search and over the counter markets, getting into the “nitty gritty” level of how trade works in some financial markets. While in many markets trade occurs through exchanges, in some markets, such as the corporate bond market, trade is more likely to occur through some form of a bilateral meeting. Shimer explored key considerations in modeling these transactions.
  • Rohan Kekre of Chicago Booth described models to track the transmission of monetary shocks focusing on how the shocks redistribute wealth throughout households, institutions, and countries. His work explored the co-movement and amplification of asset prices and the potential impacts of monetary policies.
  • Zhiguo He explained how corporate bonds represent the “conjunction” between the macroeconomy and the corporate financial sector. He introduced two models. One investigated corporate leverage dynamics and policy, and the other centered on structural contributors to U.S. corporate bond price changes, highlighting the roles of intermediary distress and dealer inventory levels.

This variety of presentations was one of the conference’s main points. “I think interdisciplinary work is really valuable because if you think about where creativity comes from, it’s not coming from repetition,” said Ma, who also serves as an Advisory Committee member of the Macro Financial Research program.

Antoine Hubert de Fraisse, a third-year Ph.D. student in finance at HEC Paris and a summer session young scholar, concurred, “I think most of the new ideas I developed came mainly from the talks that were the most distant from my research.”

For de Fraisse, the quality of interactions among the faculty and his peers was also valuable. “I think of (the summer session) as a way of breaking the glass that might separate students,” he said. “I’ve attended many conferences and Ph.D. seminars, but I think none of them has been as intellectual stimulating as this one.”

Another priority of the summer session was introducing young scholars to areas where they might want to steer their research next. Each presenter dangled new research questions in front of the scholars, hoping to entice them deeper into the macro finance research frontier.

“Data is the most valuable asset these firms have,” Laura Veldkamp said in her presentation on the emerging field of valuing data as an asset class. She and Maryam Farboodi  presented on the macroeconomic and financial implications of an economy transitioning from a goods market to a data market. While Veldkamp considered valuation challenges, Farboodi focused on data measurement and investor use of data. Her findings showed that most data processing by investors is about large-growth firms because they perceive the value to be there. “Data is the new oil,” Farboodi said.

In closing, Veldkamp quipped that if the young scholars had an idea that she and Farboodi didn’t mention in their presentations, it’s probably new. “My guess is nobody’s written that paper with a high degree of competence yet, so there are a lot of new directions to explore,” she said.

The MFR Summer Session for Young Scholars event was designed for early-career professionals and doctoral students in economics and related fields who are interested in developing enhanced macroeconomic models with linkages to the financial sector. It provided an opportunity to learn about, discuss, and advance work on macro models with financial sector linkages and related topics. The goal in gathering elite researchers and promising young scholars through this event is to exchange ideas and to construct better, more comprehensive models for assessing systemic risk stemming from activities in the financial sector that can impact the economy. Emerging scholars can play an important role in that effort. This event engaged these young scholars in that mission and provides access to methods, insights, expertise, and contacts that can enhance their efforts.

The 2022 MFR Summer Session for Young Scholars was co-sponsored by generous financial contributions from the Alfred P. Sloan Foundation and Edward R. Allen, AM ’85, PhD ’92.

The MFR Program is led by Lars Peter Hansen, the David Rockefeller Distinguished Service Professor in Economics, Statistics, and the Booth School of Business, and the recipient of the 2013 Nobel Prize in Economics. Throughout the four days of this summer session, faculty from the Kenneth C. Griffin Department of Economics and the Booth School of Business surveyed and discuss recent research on a variety of topics in the macro-finance field.

To receive announcements about future MFR Program events, please email mfrinfo@uchicago.edu  

MFR Summer Session for Young Scholars


Monday, August 1, 2022
8:00 am - 9:00 am
Registration & Breakfast
9:00 am - 9:05 am
Welcome Remarks
Lars Peter Hansen, University of Chicago
9:05 am - 10:25 am
Mean Field Games with Applications to Macro-Finance
Fernando Alvarez, University of Chicago
10:25 am - 10:40 am
10:40 am - 12:00 pm
Digital Currencies: What does the Future Hold?

Harald Uhlig, University of Chicago

12:00 pm - 1:30 pm
Lunch Break & Young Scholars Poster Session

Filippo Cavaleri, University of Chicago- “The Convenience Yield and the Demand for U.S. Treasury Securities”
Joanna Harris, University of Chicago- “Asset Pricing Implications of Firm-Level Exposure to Climate Risk”
Antoine Hubert de Fraisse, HEC Paris – “The Term Structure of Interest Rates and the Duration of Corporate Investment”
Marcelo Jardim Sena, Stanford University – “Term Structure of Dividends: What Can We Learn About Monetary Policy?”
Marco Thalhammer, RWTH Aachen University – “Pricing Green and Brown Stocks: Why Heterogeneity Matters”
Andrew Kane, Duke University – “Product Price Change Timing and Stock Returns”

1:30 pm - 2:50 pm
Heterogeneity, Financial Markets, and Macroeconomic Fluctuations

Rohan Kekre, University of Chicago

2:50 pm - 3:05 pm
3:05 pm - 4:25 pm
The Consequences of Uncertain Climate Change for Markets and Policy
Lars Peter Hansen, University of Chicago
4:25 pm
Conference Adjourns
6:00 pm - 9:00 pm
Conference Dinner
Tuesday, August 2, 2022
8:00 am - 9:00 am
Registration & Breakfast
9:00 am - 10:20 am
Corporate Bonds: Pricing and Beyond
Zhiguo He, University of Chicago Booth School of Business
10:20 am - 10:35 am
10:35 am - 11:55 am
Random Search and Over the Counter Markets
Robert Shimer, University of Chicago
11:55 am - 1:25 pm
Lunch Break & Young Scholars Poster Session

Maxim Alekseev, Harvard University – “The Portfolio Theory of Trade Currency Invoicing”
Chang He, University of California, Los Angeles – “Identifying the Size of Open Market Operations in Foreign Exchange Interventions”
Ghassane Benmir, London School of Economics and Political Science – “Distributional Costs of Net-Zero: A Heterogeneous Agent Perspective”
Dohan Kim, University of Pennsylvania – “The Bank Distress Amplifier of Recessions”
Sun Yong Kim, Northwestern University – “Global Footprint of US Fiscal Policy”
Xu Lu, Stanford University – “Monetary Transmission in Inelastic Markets: The Role of Cross-Market Rebalancing”

1:25 pm - 2:45 pm
Macro Finance in Inelastic Markets
Ralph Koijen, University of Chicago Booth School of Business
2:45 pm - 3:00 pm
3:00 pm - 4:20 pm
The Dollar, CIP Deviations and Frictions in International Capital Markets
Wenxin Du, University of Chicago Booth School of Business
4:20 pm
Conference Adjourns
6:00 pm - 9:00 pm
Conference Dinner
Wednesday, August 3, 2022
8:00 am - 9:00 am
Registration & Breakfast
9:00 am - 10:20 am
Expectations in Finance and Macroeconomics
Yueran Ma, University of Chicago Booth School of Business
10:20 am - 10:35 am
10:35 am - 11:55 am
(Virtual Presentation) The Fiscal Theory of the Price Level
John Cochrane, Stanford University
11:55 am - 1:25 pm
Lunch Break & Young Scholars Poster Session

Joe Huang, University of Pennsylvania – “Investment Scopes of Institutional Investors”
Akash Raja, London School of Economics and Political Science – “Five Facts About the Dynamics of Stock Market Participation”
Wentao Zhou, University of Wisconsin-Madison – “Indebted Corporate Portfolio Choice and the Transmission of Uncertainty Stocks”
Belinda Chen, University of Illinois at Urbana-Champaign- “Network Factors for Idiosyncratic Volatility Spillover”
Wentong Chen, Cornell University – “The Power Reserve Tiering: Financial Institution Heterogeneity and Monetary Policy Pass-Through”

1:25 pm - 3:25 pm
The Macroeconomics and Finance of Data as an Asset
Maryam Farboodi, Massachusetts Institute of Technology
Laura Veldkamp, Columbia University
3:25 pm - 3:40 pm
3:40 pm - 5:00 pm
Group Faculty Meetings with Students
5:00 pm
Conference Adjourns
Thursday, August 4, 2022
8:00 am - 9:00 am
Registration & Breakfast
9:00 am - 10:20 am
Group Faculty Meetings with Students
10:20 am - 11:20 am
(Virtual Presentation) Writing and Presenting Economics Research
John Cochrane, Stanford University
11:20 am - 12:20 pm
Lunch and Closing Remarks

Lars Peter Hansen, The University of Chicago