AØKA08236U Summer school 2021: Macroeconomic Risk Management (F)

Volume 2020/2021

MSc programme in Economics – elective course

Bacheloruddannelsen i økonomi – valgfag efter 3. år

The Danish BSc programme in Economics - elective course after the 3.year


The course is part of the Financial line at the MSc programme in Economics,   symbolized by ‘F’.


Professional work in Finance often requires the assessment of macroeconomic risks. Thus, it is desirable to acquire tools for better understanding these risks, to what extent they can (or cannot) be addressed through public policies, and what hedging strategies are available.


Fortunately it is possible to carry most of this analysis with standard Finance tools. In this course we will integrate knowledge acquired in different areas (e.g. Corporate Finance, Financial Intermediation, Risk Management, and Behavioral Finance) to study the impact of macroeconomic risks.


We will start with an in depth analysis of the Great Recession that will show us how the financial system can amplify shocks. Then we will use Finance tools to study macroeconomic risk and their optimal and feasible management. We will then study two particular types of global risk: Of a global nuclear war, and global warming. Finally we will consider how fiscal and monetary policy smooth business cycles and how the social security system can redistribute intergenerational shocks, highlighting differences in how these risks can be managed in developed and developing countries.

Learning Outcome

After completing the course the student is expected to be able to:



  • Account for the basic concepts of several macroeconomic risks that affect business cycles.
  • Identify these risks and discuss the best way to address them
  • Discuss - in economic terms - the reasons and implications of these decisions.



  • Use finance tools, such as the Capital Asset Pricing Model or Value at Risk to analyze the financial aspects of these shocks.
  • Apply new tools such as the Long Run Risk Consumption Based Asset Pricing Model to study global macroeconomic risks.
  • Analyze how to deal with exposure to macroeconomic risk, where the concepts and methods of modern finance analysis are central



  • Apply the acquired knowledge and skills independently in later employment in either public or private institutions.
  • Master and implement relevant financial models and concepts in new and complex contexts.


  • Barth, J., R. Brumbaugh, and J. Wilcox, (2000) “Policy Watch: The Repeal of Glass-Steagal and the Advent of Broad Banking”, The Journal of Economic Perspectives, Vol 14(2), 191-204.
  • Greenspan A., (2010), “The  Crisis”, Brookings Papers on Economic Activity,
  • Swagel P., (2009) “The Financial Crisis: An Inside View”, Brookings Papers on Economic Activity,
  • Gertler, M., and S. Gilchrist, (2018), “What Happened: Financial Factors in the Great Recession”, Journal of Economic Perspectives, 32(3), 3-30.
  • Kiyotaki N. and J. Moore, (1997) “Credit Cycles”, Journal of Political Economy, Vol 105(2), 211- .
  • Fanelli S., and M. Gonzalez-Eiras, (2019), “Resolution of Financial Crises”, Working paper, University of Copenhagen.
  • Hall R., (2010), “Why Does the Economy Fall into Pieces after a Financial Crisis”, Journal of Economic Perspectives,
  • Bernanke, B., (2010), “Monetary Policy and the Housing Bubble”, Remarks at the Annual Meeting of the Americal Economic Association, January 4.
  • Geanakoplos J., (2010), “Solving the Present Crisis and Managing the Leverage Cycle”, Federal Reserve Bank of New York Economic Policy Review, Vol 16(1), 101-131.
  • Gorton G., y A. Metrick, (2011), “Securitized Banking and the Run on Repo”, Journal of Financial Economics.
  • Shleifer A., and R. Vishny, (2011), “Fire Sales in Finance and Macroeconomics”, Journal of Economic Perspectives, vol 25(1).
  • Hanson, Stein and Kashyap, (2010), “A Macroprudential Approach to Financial Regulation”, Journal of Economic Perspectives.
  • Brunnermeier M., (2010), “Should a Bank Tax be Used to Limit Financial Risk?” The Economist, June 7.
  • Shiller  R. “The New Financial Order”, Introductions, chapters 1-2.
  • Campbell J. and L. Viceira, (2002) “Strategic Asset Allocation”, Oxford University Press, chapters 1-3
  • Angeletos M. and L. Calvet, (2006) “Incomplete Markets, Growth and the Business Cycle”, Journal of Monetary Economics.
  • Athanasoulis S. and E. van Wincoop, (2000), “Growth, Uncertainty and Risk Sharing”, Journal of Monetary Economics, vol 45, 477-505.
  • Thaler R. and C. Sunstein, (2009), “Nudge”, Yale University Press, chapter 3.
  • Shiller R. , (2000), “Irrational Exuberance”, chapter 5.
  • Banerjee A., (1992), “A Simple Model of Herd Behavior”, Quarterly Journal of Economics, vol 107(3), 779-817
  • Caballero R., K. Cowan and J. Kearns, (2005) “Fear of Sudden Stops: Lessons from Australia and Chile”, Journal of Policy.
  • Akerloff G., and R. Shiller, (2009), “Animal Spirits”, Princeton University Press, chapters 6 and 11.
  • Lamont O., and J. Stein, (2009), “Investor Sentiment and Corporate Investment: Micro and Macro”, American Economic Review.
  • Reinhart C., and K. Rogoff, (2009), “This Time is Different”, chapters 1, 2, 4, 5, 12-15.
  • Calvo G., A. Izquierdo, and E. Talvi, (2006) “Phoenix Miracles”
  • Breeden D., (1979), “An Intertemporal Asset Pricing Model with Stochastic Consumption and Investment Opportunities”, Journal of Financial Economics, Vol 7, 265-96.
  • Athanasoulis S and R. Shiller, (2001), “World Income Components: Measuring and Exploiting International Risk Sharing Opportunities”, American Economic Review,
  • Backus D., P. Kehoe, and F. Kydland, (1992), “International Real Business Cycle”, Journal of Political Economy, Vol 100, 745-775.
  • Shiller R., (1993), “Macro Markets”, Oxford University Press, chapters 4-5.
  • Brainard W., and F. Dolbear, (1971), “Social Risk in Financial Markets”, American Economic Review, Vol 61, 360-70.
  • Caballero R., and A. Krishnamurthy, (2004), “Smoothing Sudden Stops”, Journal of Economic Theory.
  • Talvi E., and C. Vegh, (2005), “Tax base variability and procyclical fiscal policy in developing countries” Journal of Development Economics, 56(1), 156-190.
  • Diamond P., (1997), “Macroeconomic Aspects of Social Security Reform”, Brookings Papers on Economic Activity.
  • Krueger D. and F. Kubler, (2006), “Pareto-improving social security reform when financial markets are incomplete?”, American Economic Review.
  • Gonzalez-Eiras M., and D. Niepelt, (2008), “The future of social security”, Journal of Monetary Economics.
  • D’Amato, and V. Galasso, (2011), “Political Intergenerational Risk Sharing”, Journal of Public Economics.
  • Gonzalez-Eiras M., Luo V., and D. Niepelt, (2019), “Annihilation Risk”, working paper, University of Copenhagen.
  • Engle III, R., Giglio S., Kelly B., Lee H., and J. Stroebel, (2019), “Hedging Climate Change News”, NBER working paper 25734.
The course requires knowledge equivalent to that achieved in Macroeconomics III and Microeconomics III from the Study of Economics, Copenhagen University, or similar.

Update 13.11.2020:
The course requires knowledge equivalent to that achieved in "Econometrics I" and "Corporate Finance and Incentives" from the Study of Economics, University og Copenhagen or similar.
Lectures, exercise classes and mandatory assignments.

The teaching (lectures and exercise classes) is conducted physically on campus.
So far, a negative test result/Corona pass must be presented at attendance until 1 August. Check Absalon and study notices in case of changes to this.
The teaching can also be followed online. Check out Absalon how to access the virtuel teaching.
Lectures: 4 hours every day from the 5th to 9th and 12th to 16th of July 2021.
Exercise classes: 3 days with 3 hours in the afternoon in the first and second week.
Selfstudy in the third week.

Timetable and venue: (Available from April 2021)
Press the link:
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-B5-5F21; [Name of course]””
-Select Report Type: "List - Week Days"
-Select Period: “Efterår/Autumn – Week 31-4”
Press: “ View Timetable”
  • Category
  • Hours
  • Lectures
  • 42
  • Class Instruction
  • 9
  • Preparation
  • 131
  • Exam
  • 24
  • Total
  • 206


At the beginning of the lectures there will be a short quiz on a reading for that lecture. Quizzes will be evaluated and the students will receive individual written and collective oral feedback on the quizzes.

7,5 ECTS
Type of assessment
Written assignment, 24 hours
individual take-home exam. It is not allowed to collaborate on the assignment with anyone.
The exam assignment is given in English and must be answered in English.

In case of a pandemic like Corona the date, time and type of exam as well as use of aids may be changed. Any further information will be announced here in the Exam section.
Exam registration requirements

Some mandatory assignments and quizzes must be approved to be able to sit the exam.


All aids allowed

for the written exam.


In case of an oral reexam, please go to the section "Reexam" for further information about allowed aids.



Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
Exam period

The written exam takes place

July 22 from 10 AM to July 23 at 10 AM

July 26 from 10 AM to July 27 at 10 AM, 2021


Note: In special cases, the exam date can be changed to another day.


Exam information:

More information about examination, rules etc.: Master students (UK), Master students (DK) and Bachelor students (DK).



The written reexam will take place

in the period December 2021 - January 2022


NOTE: If only few students register for the written re-exam, the re-exam might change to a 20 minutes oral examination with 20 minutes preparation time.

All written aids allowed during the preparation time, no aids allowed during the examination.

If changed to an oral re-exam, the exam date, time and place might change as well. The Examination's Office then informs the students by KU e-mail.


Reexam info:

Info is available in Digital Exam early December.

More info at Master(UK),Master(DK) and Bachelor(DK).

Criteria for exam assesment

Students are assessed on the extent to which they master the learning outcome for the course.


To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.