FIN-406: Macrofinance

Summary

This course provides students with a working knowledge of macroeconomic models that explicitly incorporate financial markets. The goal is to develop a broad and analytical framework for analyzing the interaction of financial decisions, macroeconomic events and policy decisions.

Official source

Moodle Page

http://go.epfl.ch/FIN-406

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Recursive economics

Recursive economics is a branch of modern economics based on a paradigm of individuals making a series of two-period optimization decisions over time. The neoclassical model assumes a one-period utility maximization for a consumer and one-period profit maximization by a producer. The adjustment that occurs within that single time period is a subject of considerable debate within the field, and is often left unspecified. A time-series path in the neoclassical model is a series of these one-period utility maximizations.

International finance

International finance (also referred to as international monetary economics or international macroeconomics) is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. International finance examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade.

Complete market

In economics, a complete market (aka Arrow-Debreu market or complete system of markets) is a market with two conditions: Negligible transaction costs and therefore also perfect information, Every asset in every possible state of the world has a price. In such a market, the complete set of possible bets on future states of the world can be constructed with existing assets without friction. Here, goods are state-contingent; that is, a good includes the time and state of the world in which it is consumed.

Intertemporal choice

Intertemporal choice is the study of the relative value people assign to two or more payoffs at different points in time. This relationship is usually simplified to today and some future date. Intertemporal choice was introduced by John Rae in 1834 in the "Sociological Theory of Capital". Later, Eugen von Böhm-Bawerk in 1889 and Irving Fisher in 1930 elaborated on the model.

Week

A week is a unit of time equal to seven days. It is the standard time period used for short cycles of days in most parts of the world. The days are often used to indicate common work days and rest days, as well as days of worship. Weeks are often mapped against yearly calendars, but are typically not the basis for them, as weeks are not based on astronomy. The modern seven-day week can be traced back to the Babylonians, who used it within their calendar.