MFM Summer Session for Young Scholars

June 11–15, 2016

(All day)

Wequassett Resort, Harwich, Massachusetts

MFM codirector Lars Peter Hansen shared this overview of the initiative's first Summer Session for Young Scholars.

Many years ago I participated in a project supported by the National Research Council that was designed to nurture linkages between mathematics and the sciences. Through this experience I was introduced to an exciting cross-disciplinary teaching opportunity called the Geophysical Fluid Dynamics Program at Woods Hole.

This summer program, which was founded in 1959, brought leading faculty from diverse backgrounds together with promising young scholars who shared a common interest in nonlinear dynamics. The goal was to introduce them to a then relatively new topic in mathematical physics, geophysical fluid dynamics.

In 2000, the National Research Council published a book on the program that suggested it “could serve as a model for introducing senior scientists, graduate students, and postdoctoral fellows to cross-disciplinary research and for sustaining their interest in and commitment to such research.” The possibilities for replicating this approach stayed with me. I remained curious to see if a similar program could be productive in economics.

The culmination of that ambition came in June 2016, as Andrew Lo of MIT and I planned and led a new offering: the MFM Summer Session for Young Scholars. The sessions immersed students in an exploration of the linkages between macroeconomics and finance, with the goal of advancing quantitative and empirical work on macro models aimed at supporting prudent policy-making. Interestingly enough, the event was held in Harwich, MA, on Cape Cod, not too far from Woods Hole.

Through this inaugural conference, almost 50 young scholars from around the world gained the opportunity to engage in many informal discussions with senior experts from academia, the private sector, and research groups from governmental agencies, much in the way envisioned in the 2000 NRC report. They also listened to panel discussions on key topics and made important new contacts with other young scholars with closely related research interests.

The panel discussions highlighted various challenges and opportunities faced by the experts; the lectures focused on evidence and methods, new data sources, research challenges in the private and governmental sectors, and methods for addressing complexity and big data.

Among many lectures, Deborah Lucas reminded the young scholars that the government itself is a “systematically important financial institution” that warrants scrutiny. Antoinette Schoar reported that we still have much to learn about the systemic impact of housing finance, and Christopher Sims argued that there remain open empirical questions about the linkages between credit cycles and business cycles. Simon Gilchrist looked at inflation dynamics and firm behavior during the financial crisis and discussed its implications for monetary policy.

Students also learned about modeling advances featuring nonlinear transition mechanisms induced by financing restrictions from Yuliy Sannikov, Jarda Borovička, and myself.

In contrast to some of the other summer camps in economics, many of the young scholars were sufficiently advanced to present their own research for informal scrutiny and feedback.  We had 17 posters in multiple sessions and 9 student presentations that contributed notably to the conversation and exchange. 

This first conference was a great start for a program that I sincerely hope will nurture important research long into the future.

–Lars Peter Hansen

Evidence and Methods

  1. Computation in Heterogeneous-Agent Models with Financial Frictions
    Yuliy Sannikov, Princeton University
    Presentation slides

    RELATED PAPER
    Brunnermeier and Sannikov: "Macro, Money, and FInance: A Continuous TIme Approach"
     

  2. Inflation Dynamics During the Financial Crisis
    Simon Gilchrist, Boston University
    Presentation slides

    RELATED PAPERS
    "Inflation Dynamics During the Financial Crisis"
    "Financial Heterogeneity and Monetary Union"
    "Customer Markets and Financial Frictions: Implications for Inflation Dynamics"
     

  3. Dynamic Valuation in Macroeconomic Models with Financing Restrictions
    Lars Peter Hansen, University of Chicago
    Presentation slides

    RELATED PAPERS
    Handbook chapter: "Term Structure of Uncertainty in the Macroeconomy"
    Fisher-Schultz Lecture: "Dynamic Valuation Composition WIthin Stochastic Economies"
    "Examining Macroeconomic Models through the Lens of Asset Pricing"
    He and Krisnamurthy: "Intermediary Asset Pricing"
     

  4. Term Structure of Risk Prices and Exposures in Nonlinear Models
    Jarda Borovička, New York University
    Presentation slides

    RELATED PAPERS
    Borovička, Hansen, Scheinkman (2016): "Misspecified Recovery"
    Ai, Croce, Li (2012): "Toward a Quantitative General Equilibrium Asset-Pricing Model with Intangible Capital"
    Gertler, Kiyotaki (2011): "Financial Intermediation and Credit Policy in Business Cycle Analysis"
    Brunnermeier, Sannikov (2014): "A Macroeconomic Model with a Financial Sector"
     

  5. Bayesian Estimation and Model Evaluation
    Frank Schorfheide, University of Pennsylvania
    Presentation slides
     
  6. Christopher Sims, Princeton University
    Presentation slides

New Data Sources and Evidence

  1. The Role of Mortgage Markets for the Macro Economy
    Antoinette Schoar, Massachusetts Institute of Technology
    Presentation slides

    RELATED PAPER
    Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class
     

  2. Beyond the Fed: Incorporating Government Financial Institutions and Policies into Macro Models
    Deborah Lucas, Massachusetts Institute of Technology
    Presentation slides
     
  3. Algorithmic and High Frequency Trading, Liquidity, Latency and Regulation
    Andrei Kirilenko, Massachusetts Institute of Technology
    Presentation slides

Panel Discussion: Research Challenges from the Private Sector

Darryll Hendricks, UBS Investment Bank
Bluford Putnam, CME Group
Presentation slides
Ronald Ratcliffe, BlackRock 

Big Data, Model Complexity, and Interpretability

Machine Learning and Finance
Sanmay Das, Washington University in St. Louis
Presentation slides

Accounting

The Procyclicality of Bank Accounting Rules Before and After the Financial Crisis
Anne Beatty, Ohio State University
Presentation slides

RELATED PAPER
Financial accounting in the banking industry: A review of the empirical literature

Panel Discussion: Research Challenges Faced by Regulators

Nina Boyarchenko, Federal Reserve Bank of New York
Presentation slides
Laura Kodres, International Monetary Fund
Presentation slides
Akhtar Siddique, US Treasury
Presentation slides

Andrew W. Lo, Massachusetts Institute of Technology, moderator

Frontiers of Research: Young Scholars Poster Session and Presentation

Challenge to Students: Tackling Unanswered Questions from the Financial Crisis

Andrew W. Lo
Presentation slides
 

June 11, 2016 (All day) June 15, 2016 (All day)