This research initiative, housed within the Becker Friedman Institute at The University of Chicago, will expand our understanding of how financial markets affect the economy as a whole and, conversely, how the macroeconomy influences financial markets. It will do so by bringing together a community of elite scholars with common ambitions to tackle these important challenges.
The initiative explores the following themes:
- Macro Financial Modeling
- The Monetary and Fiscal History of Latin America
- Financing Investment in China
- Behavioral Implications of Uncertainty in Macroeconomics (BUMP)
Through sponsored research projects, conferences, and interactions with visiting scholars, this initiative focuses on these fundamental questions:
How do we best capture the interplay between monetary and fiscal policy?
How do we construct models and measurements that will better support the prudent oversight of system-wide risks to the financial system?
How do we provide a more coherent assessment of the financial obligations of government?
How does the credit cycle influence the business cycle, and how does the business cycle affect the credit cycle?
What broader lessons can we extract from country-specific monetary and fiscal histories?
The initiative welcomes proposals for University of Chicago faculty and advanced graduate students for research projects involving comparisons of existing linear and nonlinear economic models, linkages between economic sectors, new and improved software for macroeconomic models and other tools related to better measurement of systemic risk, broadly defined. In addition, we welcome studies of macroeconomic impacts of monetary and fiscal policy and their interactions.
Proposals may be submitted at any time to Diana Petrova, MFRI Associate Director at email@example.com. See links below for more information.
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
- John Heaton, Professor, University of Chicago Booth School of Business
- Anil Kashyap, Professor, University of Chicago Booth School of Business
- Ralph Koijen, 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 Booth Asset Pricing Conference - December 6-7, 2018 at The University of Chicago
- Macro Financial Modeling (MFM) Winter Meeting - February 21-22, 2019 in New York City
- Robustness in Economics and Econometrics Conference - April 5-6, 2019 at the University of Chicago
- MFRI/IADB Monetary and Fiscal History of Latin America Conference - September 24-25, 2018 in Washington DC
- 2018 Monetary and Fiscal History of Latin America - August 24, 2018 in Santiago, Chile
- 2018 MFM Summer Session for Young Scholars - June 17-21, Harwich, Massachusetts
- Taxation and Fiscal Policy Conference - May 18-19, 2018 at the University of Chicago
- Macro Financial Modeling Winter 2018 Meeting - January 25-26, 2018 - NYMEX, 300 Vesey Street, New York, NY 10282, USA
- The Latin American Fiscal History Conference - December 11-13, 2017 at the University of Chicago
- Chicago Initiative in Theory and Empirics (CITE) - August 7-9 ,2017 at the University of Chicago
- Fiscal and Monetary History of Latin America 2016-17
- 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 in New York City
- 2017 Macro Financial Modeling Summer Session for Young Scholars - June 18-22, 2017 in Bretton Woods, NH
Macro Financial Modeling (MFM) Project
Launched in 2012 as part of the Macro Financial Research Initiative, this collaborative venture works to develop and assess enhanced macroeconomic models that better account for important financial sector influences on the economy. The aim is to close gaps in our ability to define, measure, and manage financial sector activities that pose risks to the macroeconomy as a whole.
The project brings together a network of prominent scholars and innovative early career researchers actively working in this field. Since 2012, the project group has met regularly to discuss and critique current and proposed models. With input and regular involvement of policymakers, the group is working to develop the next generation of policy tools.
- Lars Peter Hansen, University of Chicago, Project Director
- Andrew W. Lo, Massachusetts Institute of Technology, Project Director
Previous MFM Meetings
2018 MFM Summer Session for Young Scholars - June 17-21, Harwich, Massachusetts
Macro Financial Modeling Winter 2018 Meeting - January 25-26, 2018 - NYMEX, 300 Vesey Street, New York, NY 10282, USA
2017 Macro Financial Modeling Summer Session for Young Scholars - June 18-22, 2017, Bretton Woods, NH
Macro Financial Modeling Winter 2017 - March 9-10, 2017, New York, NY
Latin American Fiscal Studies Project
Latin American economies have endured a wide variety of experiences in terms of the design, the implementation and the consequences of monetary and fiscal policies. While many country-specific narratives exist, this research project is assembling comprehensive historical time series for eleven countries to provide more complete and comprehensive accounts for each country and to facilitate cross-country comparisons. This project, as part of the MFRI, 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 valuable guidance for policy makers, international financial institutions, and the academic community.
Behavioral Implications of Uncertainty in Macroeconomics (BUMP)
How people conceive of and respond to uncertainty is a critical behavioral ingredient of dynamic economic models. In many macroeconomic models today, uncertainty has only modest impacts. This is because these models embrace the assumption of rational expectations that says that people know the probabilities implied by the model. The rational expectations assumption is a valuable tool for evaluating many problems, but is dubious for analyzing many of the important situations we face today when concerns about temperatures, other physical determinants of long-term growth prospects, and demographic drivers of possible “secular stagnation” are on many peoples' minds. Therefore, we propose to expand the usual rational expectations approach in macroeconomics by attributing uncertainty to the probabilities that people in our models are facing. We see this as having vital implications for formulating sensible economic policies. We push beyond the conventional risk-based, rational expectations analyses by building on more general paradigms coming from decision theory and modern mathematical control theory. Furthermore, we complement and extend other behavioral research that emphasizes psychological mechanisms. We accomplish this by using statistical theory to formalize how environmental complexities of the model framework can influence individual behaviors. This project is funded by generous support by the Alfred P. Sloan Foundation.
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 formally named "Chinese Financial Markets (CFM)" as part of the MFRI, 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.
University of Chicago Joint Program in Financial Economics
This Macro Financial Research Initiative project will seek to encourage the participation of interested and promising advanced graduate student researchers. One vehicle for doing this is the Joint Program in Financial Economics at the University of Chicago. This program is a collaboration between the Economics department and the Booth School of Business.
The aim of this program is to exploit the strengths of both sponsors in training PhD students interested in financial economics. Core economics training is valuable for students seeking to do research in financial economics, and advances in financial economics have important spillovers to other areas of economics.
Every year, the program holds a number of conferences, workshops and events designed to expose students to frontier research in financial economics and to encourage research collaborations aimed at supporting prudent policy-making.
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.
For initiative inquiries, please contact Diana Petrova, MFRI Associate Director, at firstname.lastname@example.org.