Macro Finance

llsms2012  2020-2021  Louvain-la-Neuve

Macro Finance
Due to the COVID-19 crisis, the information below is subject to change, in particular that concerning the teaching mode (presential, distance or in a comodal or hybrid format).
5 credits
30.0 h
Q2
Teacher(s)
Language
English
Prerequisites
  • Econometrics, Finance and Fundamental mathematical and statistical concepts. Concepts covered in courses such as the ones listed below should be known.
  • Econométrie [ LECGE1316 ]
  • Mathématiques en économie et gestion I [ LECGE1112 ]
  • Mathématiques en économie et gestion II [ LECGE1230 ]
  • Statistique en économie et gestion I [ LECGE1114 ]
  • Statistique en économie et gestion II [ LECGE1224 ]
  • Finance [ LECGE1332 ]
In addition, this course is reserved for students with a bachelor's degree in business engineering or students with equivalent quantitative method skills.
Main themes
The financial crises of the last twenty years have stressed more than ever the close connection between financial markets and the real economy. This course ideally splits this connection in two directions: (i) from the real economy to financial markets and (ii) from the financial markets to the real economy. In the first part we study the role of financial markets/products as mean of intertemporal allocation of future consumption streams. In the second part of the course, we highlight the role of financial products as mean to reallocate risk within the financial system, highlighting how mis-allocation/pricing of risk lead (and can lead) to financial crises with severe macroeconomic consequences.
Aims

At the end of this learning unit, the student is able to :

1

During their programme, students of the LSM Master’s in management or Master’s in Business engineering will have developed the following capabilities

KNOWLEDGE AND REASONING

2.2 Master highly specific knowledge in one or two areas of management: advanced and current research-based knowledge and methods.

A SCIENTIFIC AND SYSTEMATIC APPROACH

3.3 Consider problems using a systemic and holistic approach: recognize the different aspects of the situation and their interactions in a dynamic process.

WORK EFFECTIVELY IN AN INTERNATIONAL AND MULTICULTURAL ENVIRONMENT

5.2 Understand the international socio-economic dimensions of an organization and identify the associated strategic issues and operational decisions.

TEAMWORK AND LEADERSHIP

6.1 Join in and collaborate with team members. Be open and take into consideration the different points of view and ways of thinking, manage differences and conflicts constructively, accept diversity.

 

 

The contribution of this Teaching Unit to the development and command of the skills and learning outcomes of the programme(s) can be accessed at the end of this sheet, in the section entitled “Programmes/courses offering this Teaching Unit”.
Content
The content of the course is the following:
  • Part 1: From the Real Economy to Financial Markets
    • Facts: time variation and business cycle correlation of expected returns;
    • Empirical evidence of CAPM and Mean Variance Efficient portfolios;
    • Equity premium;
    • Consumption models;
    • Empirical evidence on equity premium puzzle and consumption models.
  • Part 2: From the Financial Markets to the Real Economy:
    • Channels of funding and the role of (shadow) banks
    • The financial crash and systemic risk
    • Solvency versus liquidity
    • The nexus between the private and public sectors
    • The flight to safety
    • Unconventional monetary policy
Teaching methods

Due to the COVID-19 crisis, the information in this section is particularly likely to change.

  • Lectures
  • Teamwork
Evaluation methods

Due to the COVID-19 crisis, the information in this section is particularly likely to change.

Continuous evaluation
  • Date: will be specified later
  • Type of evaluation: Group Assignment, Closed-book written test.
  • Comments: No
Evaluation week
  • Oral: No
  • Written: No
  • Unavailability or comments: No
Examination session
  • Oral: No 
  • Written: No
  • Unavailability or comments: No
Bibliography
Support de cours
Part 1 : «Financial markets and the real economy» by John Cochrane, available at https://faculty.chicagobooth.edu/john.cochrane/research/papers/financial_and_real_proofs_aug_07.pdf
Part 2 : «A crash course on the euro crisis » by Markus K. Brunnermeier and Ricardo Reis, available at https://scholar.princeton.edu/sites/default/files/markus/files/19-crashcourse.pdf
Faculty or entity


Programmes / formations proposant cette unité d'enseignement (UE)

Title of the programme
Sigle
Credits
Prerequisites
Aims
Master [120] in Economics: General

Master [120] : Business Engineering

Master [120] : Business Engineering