ECO529: Macro, Money and International Finance
- Syllabus
- Lecture Notes (preliminary and evolving)
- Lecture Zoom Video Links
Outline
1. Why Continuous Time Modeling
2. Continuous Time Stochastic Optimization (Consumption, Portfolio)
- 02slides
- 02video
- 02slides of TA Session 01 (ODE, PDE, Stochastic Maximum Principle)
- 02video of TA Session 01
- Stochastic Calculus Basics
- Differential Equations Basics
- Problem Set Basics
3. A Simple Macro-Finance Model with Heterogeneous Agents
4. Endogenous Risk Dynamics with Log utility
5. Contrasting Financial Frictions
6. ... with CRRA and Epstein-Zin utility, ValueFcn Backwards Iteration
7. Kolmogorov Forward Equation
8. Numerical Methods
Videos by Yuliy Sannikov
- 8.01 Introduction: General Class of Equations
- 8.02 Example: Valuation Equation and HJB
- 8.03 Forward and Backward Equations: HJB, KFE
- 8.04 Finite Difference Schemes: Key Principles
- 8.05 Finite Difference Operator and sign of Matrix M
- 8.06 Explicit Scheme
- 8.07 Implicit Scheme
- 8.08 Stationary Value Function in a Single Step
- 8.09 KFE using Matrix M
- 8.10 General Class of HJB in One Dimension
- 8.11 Solving HJB
- 8.12 Non-monotone Schemes (what can go wrong?)
- 8.13 Valuation Equation in m Dimensions
- 8.14 Convex Positive Semidefinite Cone
- 8.15 Some Geometry Details in Two Dimensions
- 8.16 The Algorithm for the 2nd-order Term in Two Dimensions
- 8.17 Assembling M and Solving the Valuation Equation
- 8.18 Solving HJB Equation in m Dimensions
9. Endogenous Risk Dynamics with Jumps
10. Monetary Store of Value Model with Idiosyncratic Risk
11. Monetary Store of Value Model with Time-varying Idiosyncratic Risk and Safe Assets
12. Medium of Exchange Addition and Contrasting Monetary Theories
13. Unit of Account, Multi-Sector Model, Banking + I Theory of Money
14. Price Rigidities - New Keynesian Elements
15. Welfare and Optimal Policy
16. International Externalities
- 16slides (from 2021)
17. International Finance, Exchange Rate, Sudden Stops
- 17slides (from 2021)
Description
In models with financial frictions, a setting with heterogeneous agents is paramount. In addition to the consumption choice, the portfolio choice of the various agents is the focus of this course. The risk itself is endogenous and so is the price of risk leading to a time-varying risk premia. Agents save for precautionary reasons in the safe asset, which consists of money and government bonds – possibly priced as a bubble. The course draws a link to leading monetary theories. As idiosyncratic risk rises, flight-to-safety flows kick in leading to endogenous consumption demand shocks. Monetary policy is necessary to avoid deflationary and liquidity spirals. The safe asset perspective sheds new light on debt sustainability analysis, currency competition, international capital flows, also in the light of emergence of new digital forms of money. New concepts like Digital Currency Areas and digital dollarization will be discussed.
Past Semesters