The 2007-09 financial crisis revealed serious gaps in our understanding of how activity in financial markets affected the economy as a whole. This initiative works to study and clarify the linkages between financial markets—including credit markets that drive the mortgage and housing industry—and the macroeconomy.
Through sponsored research projects, conferences, and interactions with visiting scholars, this initiative focuses on three fundamental questions:
1. How do we construct models and measurements that will better support the prudent oversight of system-wide risks to the financial system?
2. How does the credit cycle influence the business cycle and how does the business cycle affect the credit cycle?
3. How can we improve financial market regulation?
4. How do we extract the lessons to be learned from fiscal histories in the United States and Latin America?
5. How can we strengthen the assessment evaluation of future fiscal obligations for governments?
6. How do we best capture the interplay between monetary and fiscal policy?
The Macro Finance Research Initiative (MFRI) Advisory Committee
The MFRI Advisory Committee oversees the research agenda of the initiative. Members of the committee are prominent experts in macroeconomics and finance with particular interests in exploring linkages between these fields. They have made important substantive research contributions and are well positioned to help the research agenda for the Initiative.
Lars Peter Hansen, Professor, University of Chicago Departments of Economics, Statistics and the Booth School of Business, Committee Chair
Fernando Alvarez, Professor, University of Chicago Department of Economics
John Cochrane, Senior Fellow, Hoover Institution, and BFI Distinguished Research Fellow
Zhiguo He, Professor, University of Chicago Booth School of Business
Anil Kashyap, Professor, University of Chicago Booth School of Business
Thomas Sargent, Professor, New York University Department of Economics and BFI Distinguished Research Fellow
Amir Sufi, Professor, University of Chicago Booth School of Business
Harald Uhlig, Professor, University of Chicago Department of Economics
Chicago Initiative in Theory and Empirics (CITE) – August 7-9,2017
The Latin American Fiscal History Conference – December 11-13, 2017
Government Debt: Constraints and Choices – April 21-22, 2017
Macro Finance Society 8th Workshop – November 3-4, 2016
Macro Financial Modeling Winter 2017 – March 9-10, 2017
2017 Macro Financial Modeling Summer Session for Young Scholars – June 18-22, 2017 in Bretton Woods, NH
The Macro Financial Modeling Project
Launched in 2012 as part of the Macro Financial Research Initiative, this broad-based collaborative effort works to develop and assess more ambitious macroeconomic models that can identify and measure potential sources of risk better than existing models used by policymakers. It engages economists from central banks and other policy agencies and draws on perspectives from the financial sector to develop the next generation of policy tools.
These enhanced models will be rich enough to study the impact of shocks that are either initially large or build endogenously over time.
This project has focused on encouraging young scholars to work in this area and develop new models. Another key contribution is the development of a model repository researchers can use to evaluate and compare different models. Learn more »
Financing Investment in China Project
The instruments of finance are evolving quickly in China. China's interbank market has experienced rapid growth and has turned the nation into the third largest economy in the world behind the United States and Japan. Participants in this market include commercial banks, insurance companies, mutual funds, and other qualified institutions. This project will provide a comprehensive study of the interbank market in China including its overall stability, its consequences for investment and its support for new productive ventures.
Latin American Monetary and Fiscal History Project
Latin American economies have endured a wide variety of experiences in terms of the design, implementation and consequences of monetary and fiscal policies. While many country-specific narratives exist, this research project is assembling comprehensive historical time series for nine countries to provide more complete and comprehensive accounts for each country and to facilitate cross-country comparisons. The project has engaged scholars and experienced policy makers to provide accurate assessments for each country's fiscal history. The lessons gleaned from analyzing these historical data will offer guidance for policy makers, international financial institutions and the academic community.
Housing, Household Debt, and the Macroeconomy
Housing costs are the largest expense for most households and are therefore a significant portion of consumption nationally. Likewise, mortgages account for not just the lion’s share of household debt but also a substantial portion of credit markets. Surprisingly, however, the mechanisms by which mortgage and housing market disturbances ripple through the economy are not well understood.
The University of Chicago is home to a strong and growing group of experts in this area. The institute is supporting their work and fostering a collaborative community of researchers at Chicago Booth, Northwestern University, and the Federal Reserve Bank of Chicago. To that end, the institute sponsored a conference called Housing, Household Debt, and the Macroeconomy in September 2016. Amir Sufi of Chicago Booth organized the conference and collaborates with the institute to bring research on this topic to the fore.
Financial Market Oversight and Regulation
Governments responded to the financial crisis by creating new agencies to monitor financial risk and regulations aimed at preventing future bank and credit crises. How well have these efforts worked? The institute has sponsored conference organized by Douglas Diamond and Amit Seru and supported research that assesses the costs and benefits of this regulation.
See feature: The Paradox of Frozen Liquidity
Collectively, these three projects will help add to our understanding of what we’ve experienced, respond to future market disruptions, and potentially add to our capabilities to predict where crises may arise.