Nova School of Business and Economics

Universidade Nova de Lisboa

The Macroeconomics of Financial Markets—2233

2nd Semester 2015-2016 (Spring 2016), 1st Half


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


Teaching Assistant:      Marco Lourenço,


Classes: Mondays (A209) and Wednesdays (A 223) 9:30-11:00

Syllabus (PDF)


Exam           19 March, 9:30, in Salao Nobre (scheduled by the department)



Mar 23

I have already sent the grades to the system. I enjoyed working with you in this course, and I hope you have enjoyed the course, too. Good luck in your future assignments! Happy Easter!

Mar 22

It was found a typo in the exam that could lead to confusion in a true/false question. Most of the students could answer the question as predicted, but there was an additional possible answer. The exam was regraded to take this additional possible answer into account. A few grades of the exam increased slightly, which might affect the final grade because of rounding. No grades decreased. All grades either stayed constant or increased. You might want to take a look at NetPa (the grade system) to check if your grade was affected.

Mar 21

I will include the grades in the system by Tuesday morning. The exam review will be on Tuesday, 18:00-19:00, in room 026.

Mar 11

Here is the statement of Mario Draghi about the last decisions of the Governing Council of the ECB. Here is the press conference video. It is good to see the primary source about these statements.

Mar 10

For those that want to know more about the financial crisis and the debt crisis, there are several papers below on the topic “The Crisis of 2008 and the Debt Crisis.” Take a look there.

Mar 9

Nice graph about the GDP Recovery after crises.

Mar 7

Take a look at these articles on corporate debt in emerging markets (notice the relation with the Fed’s policy) and on the next meeting of the ECB.

Mar 2

Class on March 14. This is just a reminder that we will have class on Monday, March 14, on the regular time and room. This class compensates the class of February 24, which was in the same day of the Business Forum.

Mar 1

Public Debt in Portugal, statistical release from the Bank of Portugal.


On Super Tuesday, a talk on Wall Street and presidential candidates: “Bad Week on Wall Street: Stocks, Oil, And New Hampshire,” by Money Talking.

Feb 29

There is an interesting interview below with Thomas Sargent that is very related to our discussion on monetary policy, fiscal policy, and sovereign crises. There is another one, on Moodle, to the Morning Star Advisor.

Especially for Asset Pricing and the efficient market hypothesis, see the interview by Fama, also below.

Feb 24

Sometimes governments try to conduct investments to their own bonds when the debt-to-GDP ratio increases fast or when a crisis is seen as imminent. This behavior is often called financial repression. Carmen Reinhart, Jacob Kirkegaard and Belen Sbrancia discuss this behavior in this article, also available on the references below.


Interesting The Economist articles for the week: on Hedge Funds, the effects of taxes on firms, and sovereign debt.

Feb 19

Inflation probabilities, from FRED database.

Feb 17

This is a very good way to see how the yield curve changes over time and its relation with the stock market. Take a look: link.

Feb 15

Take a look at these articles: on the importance of data (especially relevant to take into account when making a country evaluation) and central banks.

Feb 11

Interesting articles for this week, from The Economist: on sovereign debt, negative interest rates, and bond yields and equity returns.

Feb 9

I included some guidelines for the reports. Take a look there.

Feb 5

A great graph on asset prices over time, by CRSP: Big Picture.

Feb 4

Take a look at these articles from The Economist: Steel, Dynamic Pricing, Credit Markets.

A PDF of these articles is also available on Moodle.

Please, remember to upload your pictures on Moodle.

Jan 16

The first class will be on February 1, 9:30, room A209. 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 18, Thursday

Country Report

Report 2

Mar 3, Thursday

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

Report 3

Mar 10, 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 and the Debt Crisis

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

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.)

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


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.

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



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