One of my great teachers, Wesley C. Mitchell, impressed on me the basic reason why scholars have every incentive to pursue a value-free science, whatever their values and however strongly they may wish to spread and promote them. In order to recommend a course of action to achieve an objective, we must first know whether that course of action will in fact promote the objective. Positive scientific knowledge that enables us to predict the consequences of a possible course of action is clearly a prerequisite for the normative judgment whether that course of action is desirable. The Road to Hell is paved with good intentions, precisely because of the neglect of this rather obvious point. This point is particularly important in economics. ― Milton Friedman, Nobel Lecture, Journal of Political Economy [read more on Friedman’s views and contributions to economic sciences here.]
The Macro Finance Research Program (MFR) 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 program operates under the auspices of the Becker Friedman Institute with generous funding support from The University of Chicago Booth School of Business.
For general program inquiries, please contact Diana Petrova, MFR Program Associate Director, at firstname.lastname@example.org.
Through sponsored research projects, conferences, and interactions with visiting scholars, this program 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?
MFR Program Advisory Committee
The MFR Program Advisory Committee oversees the research agenda of the program. 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 program.
- 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
- Douglas Diamond, Professor, University of Chicago Booth School of Business
- 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
Featured COVID-19 Research
An SEIR Infectious Disease Model with Testing and Conditional Quarantine by David Berger, Kyle Herkenhoff, Simon Mongey (Jupyter Notebook)
Uncertainty and Decision-Making During a Crisis: How to Make Policy Decisions in the COVID-19 Context? by Loïc Berger, Nicolas Berger, Valentina Bosetti, Itzhak Gilboa, Lars Peter Hansen*, Christopher Jarvis, Massimo Marinacci, Richard D. Smith
Leverage-Induced Fire Sales and Stock Market Crashes by Jiangze Bian, Zhiguo He*, Kelly Shue, Hao Zhou
Coronavirus: Impact on Stock Prices and Growth Expectations by Niels J. Gormsen, Ralph Koijen*
The Fragility of Market Insurance by Ralph Koijen* and Motohiro Yogo
Dealing with a Liquidity Crisis: Economic and Financial Policies in China during the Coronavirus Outbreak by Zhiguo He* and Bibo Liu
*MFR Program Advisory Committee Member
- POSTPONED – Conference on Financial Regulation – organized by Douglas Diamond and Amit Seru
- POSTPONED – Advancing Macro Finance – organized by Yueran Ma, Kilian Huber and Lars Peter Hansen at the University of Chicago
- October 23-24, 2020 – [Virtual Conference] 16th Annual Macro Finance Society Workshop – organized by Lars Peter Hansen, Mikhail Chernov, Wenxin Du, and Niels Gormsen at the University of Chicago
The program 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.
The MFR Suite provides a collection of Python modules for conducting analysis in macro-finance. In particular, it provides the model solution to the framework developed in Hansen, Khorrami, and Tourre (2018). In addition, it provides two independent modules to compute stationary density and shock elasticities (see Term Structure of Uncertainty in the Macroeconomy and Shock Elasticities and Impulse Responses).
To report issues or suggest improvements for the MFR Suite team, submit feedback here.
We would like to thank project associate Joseph Huang for developing the MFR Suite and MFR research professional Han Xu for launching its second version in June of 2020. We would like to gratefully acknowledge the Macro Financial Modeling project through the generous financial support from the Alfred P. Sloan Foundation and Fidelity Investments and to thank Amy Boonstra, former MFM Executive Director, for her unconditional support. For their feedback, we thank Yu-Ting Chiang (University of Chicago), Jian Li (University of Chicago), Simon Scheidegger (HEC Lausanne), Elisabeth Proehl (University of Amsterdam), and conference participants at the 2nd MMCN, PASC18, University of Zurich, Northwestern University, and participants at the Economic Dynamics Working Group at the University of Chicago. We also would like to thank the Research Computing Center at the University of Chicago (RCC) for their guidance on high performance computing, in particular Peter Carbonetto and Hossein Pourreza. Read more about the MFR Collaboration with the RCC.
Previous MFR Program Conferences and Events
[Virtual Conference] 2020 MFR Program Summer Session for Young Scholars – organized by MFR Program Advisory Committee Members– July 28-31, 2020
[Virtual Conference] Expectations in Macroeconomic and Financial Models – June 25-26, 2020 organized by Monika Piazzesi, Michael Woodford and Lars Peter Hansen
The Macroeconomy and Finance in China Conference – December 12-13, 2019 organized by Lars Peter Hansen and Zhiguo He and hosted by Tsinghua University School of Economics and Management in Beijing, China
2019 Cryptocurrencies and Blockchains Conference – November 22-23, 2019 organized by Eric Budish, Zhiguo He, Jacob Leshno, and Harald Uhlig at the University of Chicago
Macro Finance Society 14th Workshop – November 1-2, 2019 – MFR co-sponsoring at the University of Southern California (USC Marshall)
University of Chicago Policy Forum on the Pension Crisis: State and Local Pension Challenges –November 8, 2019 at the University of Chicago – organized by Lars Peter Hansen and James Heckman and co-sponsored by the Center for the Economics of Human Development (CEHD)
2019 Asset Pricing Conference – October 24-25, 2019 organized by Niels Gormsen, Samuel Hartzmark and Michael Weber at the University of Chicago
2019 Housing, Household Debt, and Macroeconomics Conference – September 20 at the University of Chicago
Stanford Institute for Theoretical Economics (SITE) – July 1-2, 2019 – MFR Program co-sponsored workshop at Stanford University
University of Chicago Policy Forum: Building on the Chicago Approach to Economics – April 25, 2019 at the University of Chicago
Meeting of the Blue Collar Working Group – April 4, 2019 at the University of Chicago
Robustness in Economics and Econometrics Conference – April 5-6, 2019 at the University of Chicago (co-sponsored by BFI’s Big Data Initiative)
2019 Macro Financial Modeling (MFM) Winter Meeting – February 21-22, 2019 at the NYMEX, 300 Vesey Street, New York, NY 10282, USA
Chicago Booth Asset Pricing Conference – December 6-7, 2018 at The University of Chicago
Cryptocurrencies and Blockchains Conference – November 9-10, 2018 organized by Eric Budish, Zhiguo He, Jacob Leshno, and Harald Uhlig at the University of Chicago
MFR/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 Macro Financial Modeling Summer Session for Young Scholars – June 17-21, 2018 at Cape Cod
Taxation and Fiscal Policy Conference – May 18-19, 2018 at the University of Chicago
2018 Macro Financial Modeling Winter Meeting – January 25-26, 2018 in New York City
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 – various locations
2017 Macro Financial Modeling Summer Session for Young Scholars – June 18-22, 2017 in Bretton Woods, NH
Government Debt: Constraints and Choices – April 21-22, 2017 at the University of Chicago
Macro Financial Modeling Winter 2017 – March 9-10, 2017 in New York City
Macro Finance Society 8th Workshop – November 3-4, 2016 at the University of Chicago
Launched in 2012, 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.
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 MFR Program, 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.
The Macro Finance Research Program (MFR-China) will explore financial market evolution, banking reform, debt, and reform of state-owned enterprises. Researchers will investigate the many questions facing China’s increasingly dynamic financial markets—from privacy issues to credit worthiness and systemic risk—including the emerging challenges facing China’s regulators. This research will provide important insight for Chinese policymakers, as well as build resources for future research.
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 probing 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.
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.
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 MFR is supporting their work and fostering a collaborative community of researchers at Chicago Booth, Northwestern University, and the Federal Reserve Bank of Chicago.
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. 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.