Lecture: Tuesday and Thursday 11am – 12:15pm in TYD 0111

Office Hours: Thursday 3:30 – 4:30pm in TYD 4118F

Course Fields: Macroeconomics, International Finance

Course Description:

The goal of this course is to get you started on doing cutting-edge research in macroeconomics and/or international finance, with special emphasis on imperfections in capital markets.  We will follow a two-pronged approach towards this goal: First, there is the regular “lecture” part, in which we will cover models of capital market imperfections and their implications for macroeconomic dynamics. We will develop a set of rigorous microeconomic foundations of different forms of capital market imperfections, including theories of credit rationing, incomplete risk markets, imperfect pledgeability and limited commitment. Then the course discusses the implications of these imperfections for macroeconomic dynamics, such as the financial accelerator, bubbles, as well as liquidity and solvency crises, with special emphasis on the ongoing financial crisis and policy responses.

The second and parallel part of the lecture consists of regular class assignments that aim to guide you along the process of formulating a cutting-edge research question in a proposal and carrying out your proposed research.

Requirements:

Participation: You are expected to prepare for each lecture by studying the required readings as indicated in the syllabus by (*) and as announced over time.  This will enable you to actively and effectively participate in classroom discussions.

Homeworks:

There will be four mandatory homework assignments throughout the semester.

Essay:

Occasionally I will ask each class participant to post a short essay (600 – 1000 words) to our class blog on a general, often non-technical, topic. I do not require a specific format for this, but I want you to try to be creative and thoughtful in these assignments and, to the extent possible, avoid group-think. The deadline for your posting is 8pm the day before the class meeting in which we will discuss your essays. Prepare to give us a three minute summary of your theses in class and read your colleagues’ posts between 8pm and our class meeting to prepare for a general discussion.

Wikipedia Posting:

Another course assignment is to write a Wikipedia entry of at least 1500 words that explains one of the economic concepts or terms that fall under the topic of our class to a general audience. The essay should then be publicly posted on Wikipedia. One of the main goals of this exercise is to perform a thorough literature review on a topic of your interest.  By 2/4, please coordinate with me to pick a term: we want to avoid that multiple people pick the same term, or that Wikipedia already has a well-written and extensive entry on the topic. Please submit a first draft by 2/18, which we will discuss in my office hours, and a final draft by 3/4.

Referee Report:

The course will also require you to write and present a referee report on a recent paper from our reading list (we will discuss in class which papers qualify). The timing will usually be as follows: in the first week that we cover the topic to which your paper belongs (see schedule below), please submit a written referee report of roughly five pages to me by Tuesday 11am. We will discuss the details of your report, and you will present it at the end of class on Thursday or the following week.  

The referee report should (i) summarize the main economic insights of the paper without repeating the technicalities, (ii) evaluate what the marginal contribution is and whether you buy the results, and (iii) provide a constructive critique of what could/should be improved, e.g. what assumptions are questionable, what methodologies should be reassessed etc. Detailed instructions on how to write referee reports in our field are given at here (for our course, the purpose is naturally a bit different than for real referee reports: for example, points B.3, C.3, D.3, E.3 are irrelevant and can be left out).  For practical examples of written referee reports see e.g. the “Discussions” in the NBER Macroeconomics Annual.

Final Paper:

The ultimate goal of the course is to help you make the transition from coursework to individual research. Therefore the core requirement will be the development of a research paper by the end of the summer.  I strongly recommend that you start working on this right at the beginning of the semester. Please discuss your thoughts on potential topics with me in the first or second week of class.  You should have narrowed down a topic and hand in a five page proposal in the week after spring break, by 3/23, which we will discuss in detail in my office hours. An updated 10 page version of your research proposal is due by 5/4. The final research paper is due by 8/31 and should execute the work outlined in the proposal. It should be at least 20 pages long.

Both the proposals and the paper should include (i) an abstract that does not exceed 100 words, (ii) a detailed introduction that explains why your research question is important and relevant and (iii) what precisely is your marginal contribution to the existing literature.

The proposal should cover the following: If it is for an empirical paper, include what data you will need, where you will get it from, and what regressions you will run (with a few sample equations).  If it is for a theoretical paper, include a detailed model setup, describe what solution methods you will use and what results you expect.

Note: It is ok if you want to submit the same research paper to my course and to another course, as long as (i) you notify both instructors of your plans and (ii) we determine that the paper topic falls under an area relevant to both courses.