Nova School of Business and Economics

Universidade Nova de Lisboa

The Macroeconomics of Financial Markets—2233

2016-2017, 2nd Semester (Spring 2017), 1st Half


Prof. André C. Silva   Office Hours: Thursdays 16:00-17:00, 367             webpage


Teaching Assistant:      Marco Lourenço,


Classes: Fridays 16:00-17:30, 17:30-19:00, A 217

Syllabus (PDF)


Exam           March 21, Tuesday, 16:00, Room A 217 (scheduled by the department)



Mar 28

I have already sent the grades to the system. You did a very good job during the class discussions and for the reports. This is reflected in a very good final. The grades were good. Congratulations for your performance and good luck on your next assignments.


If you want to see your exam, the review will be on Wednesday, Mar/29, 18:00, room 7A. I will post the exam solutions on Moodle.

Mar 14

The Atlanta Fed chose its new president, Raphael Bostic. Take a look: link. It is interesting to learn about the process of choosing the presidents of the regional Feds.

Mar 8

This article, on interest rates, the stock market and the economy is very related to the discussions during the course: Interest Rates.

Also take a look at this article: Yuan.

Mar 1

Dividend payments from the Federal Reserve to Banks: Financial Times.

Fannie Mae and Freddie Mac still in the news: The Economist.

Fev 24

Interesting articles to take notice, all related to sovereign debt: on the bail-out of Greece, the political economy of the crisis, and ratings.

Carry trade: Here is a recent paper from the Financial Analyst Journal on the risks and returns of carry trade.

Feb 15

Take a look at these articles from The Economist: financial regulation, bubbles, North Korea (with a map of Korea at night), and Euro-zone bonds.

The Economist also made an obituary about Hans Rosling (link). If you haven’t heard about him, take a look at his videos on youtube. They have important information about economic growth across the world that can guide international investments.

Feb 14

The FRED database has added series on corporate bond yields to reflect “high-quality market (HQM) yields,” as calculated by the US Treasury. The HQM yield curve uses data from corporate bonds rated AAA, AA, or A. Link.

Feb 13

Daniel Tarullo announced his resignation from the Board of Governors of the Fed: Washington Post, letter.

Feb 10

For the first report, remember to read the PDF below, with Guidelines for the Reports.

Feb 7

Is the US debt high or low? Take a look at these graphs (link). The debt-to-GDP ratio, however, is still the most accepted measure.


Take a look at these articles from The Economist: Hedge Funds, Custodian Services.

Jan 31

The first class will be on February 3, 16:00, room A217. See you there!


For the first class, read the text by Hayek, “The Use of Knowledge in Society.” There is a link to the text below. It is free if you connect from the network of Nova. This text is a classic! It explains the idea on the relation between prices, including prices of financial assets, and economic fluctuations. The main point to is to understand the role of prices for the best use of resources. All of this without equations.


Comments about the course (PDF)




Due Date


Report 1

Feb 16, Thursday

Country Report

Report 2

Mar 2, Thursday

Choice between: 1. The yield curve; 2. Fixed income; and 3. Sovereign debt crises

Report 3

Mar 9, Thursday

Free choice!


Guidelines for the Reports: PDF.


Additional Data, Texts, and Slides

See the course webpage on Moodle: link.



Because of the need of subscriptions, some links work only from computers connected to the university.


The Effects of Monetary Policy

Barro, R. J. (1994). “What the Fed Can't Do.” Wall Street Journal, August 19, 1994. (On Moodle.)

Friedman, Milton (1968). “The Role of Monetary Policy.” American Economic Review 58(1): 1-17, 1968.

McCandless, G. T. and Weber, W. W. (1995). “Some Monetary Facts.” Minneapolis Quarterly Review 19(3): 2-11.


How Central Banks Set the Monetary Policy

Kocherlakota, Narayana (2010). An Introduction to the FOMC.” The Region, September 2010. About how the Federal Open Market Committee works.


Why do Prices Exist?

Hayek, F. A. (1945). “The Use of Knowledge in Society.” American Economic Review, 35(4): 519-530.


Separating Trend from Cycles

Hodrick, Robert J., and Edward C. Prescott (1997). “Postwar U.S. Business Cycles: An Empirical Investigation.” Journal of Money, Credit and Banking, 29(1): 1-16.


The Term Structure of Interest Rates

Estrella, Arturo, and Mary R. Trubin (2006). “The Yield Curve as a Leading Indicator: Some Practical Issues.” Current Issues in Economics and Finance, FED New York.

A webpage on the yield curve: FED New York.


The Crisis of 1929

Bernanke, Ben S. (2002). “The Great Contraction, Remarks.” A speech during a seminar in honor of Milton Friedman in his 90th anniversary.

Cole, Harold L., and Lee E. Ohanian (2004). “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis.” Journal of Political Economy, 112(4): 779-816.


The Crisis of 2008

Acharya, Viral; Stijn van Nieuwerburgh; Matthew Richardson; and Lawrence White (2011). Guaranteed To Fail: Fannie, Freddie and the Debacle of Mortgage Finance. Princeton University Press.

Cochrane, John (2010). “Lessons from the Financial Crisis.” Regulation 32(4): 34-37.

Diamond, Douglas W. (2007). “Banks and Liquidity Creation: A Simple Exposition of the Diamond-Dybvig Model.” Economic Quarterly, 93(2): 189-200. The original model is in Douglas W. Diamond and Philip H. Dybvig (1983). “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy, 91(3): 401-419.

Diamond and Kashyap on the Recent Financial Upheavals. (On Moodle.)

Kroszner, Randall S.; and William Melick (2009). “The Response of the Federal Reserve to the Recent Banking and Financial Crisis.” Working Paper.

Lucas, Robert E. (2009). “In Defence of the Dismal Science.” The Economist, Aug 6th 2009. (On Moodle.)

Rajan, Raghuram (2012). “The True Lessons of the Recession.” Foreign Affairs 91(3): 69-79. (On Moodle.)


Sovereign Debt

Reinhart, Carmen, Jacob F. Kirkegaard, and M. Belen Sbrancia (2011). “Financial Repression Redux.” Finance and Development (IMF), June 2011.

Sargent, Thomas (2010). Interview for The Region, FED Minneapolis, September 2010. Financial crises, macroeconomics, and other issues.


Labor Taxes and the Economy

Clement, Douglas (2003). “European Vacation: Why Americans Work More Than Europeans.” The Region, December 2003.

Rogerson, Richard (2006). “Understanding Differences in Hours Worked.” Review of Economic Dynamics, 9(3): 365-409.

Silva, Andre C. (2005). “Taxes and Labor Supply: Portugal, Europe, and the United States.” III Conference Desenvolvimento Económico Português no Espaço Europeu. A technical version of this paper, with additional results, is here.



Barro, Robert (2005). Interview. The Region, FED Minneapolis, September 2005. Public deficit, economic growth, inflation targeting and other topics.

Bernanke, Ben S. (2004). Interview. The Region, FED Minneapolis, June 2004. On October 2005, Bernanke was appointed chairman of the Federal Reserve System.

Fama, Eugene (2007). Interview. The Region, FED Minneapolis, December 2007. Asset pricing, financial crises, efficient markets and many other issues.

Hansen, Lars P. (2015). Interview. The Region, FED Minneapolis, December 2015. Asset pricing and uncertainty.



Allen, Franklin, and Douglas Gale (2007). Understanding Financial Crises. Clarendon Lectures in Finance, Oxford University Press.

Bodie, Zvi, Alex Kane, and Alan J. Marcus (2014). Investments, 10th Global Ed. MacGraw-Hill.

Cochrane, John (2005). Asset Pricing, Revised Ed. Princeton: Princeton University Press.

Farmer, Roger E. H. (2010). How the Economy Works. Oxford: Oxford University Press.

Ilmanen, Antii (2011). Expected Returns: An Investor's Guide to Harvesting Market Rewards, Wiley.

Malkiel, Burton G. (2003). A Random Walk Down Wall Street. New York: WW Norton.



BlackRock Investment Institute

J.P. Morgan

Morgan Stanley: Global Economic Forum



Estatísticas do Banco de Portugal—national accounts, interest rates, money and other statistics for Portugal

Instituto Nacional de Estatística—data for Portugal


Bureau of Economic Analysis—national accounts and other statistics for the U.S.

Bureau of Labor Statistics—labor market data

Congressional Budget Office—data on the US federal budget.

Department of the Treasury (U.S.), Office of Debt Managementadditional data on interest rates


FRED—a very useful dataset, from the Federal Reserve Bank of Saint Louis


OECD—data for OECD countries

Penn World Table—for international comparisons of GDP data


Central Banks

Banco de Portugal

European Central Bank

United States: Board of Governors of the Federal Reserve System

Minutes from the Federal Open Market Committee meetings



American Economic Association

For Graduate Students

American Finance Association


NBER—recent research and data. Look for the Working Papers of the Asset Pricing group

Asset Pricing

Corporate Finance

Economic Fluctuations and Growth

Monetary Economics


Other Resources and Blogs

Cooley-Rupert Economic Snapshot: U.S., Europe

John Cohrane’s - The Grumpy Economist

John Taylor’s - Economics One

WSJ Real Time Economics


SSRN page


Universidade Nova de Lisboa

Nova School of Business and Economics