Master in Economics

Specialized Courses

Blockchains and Cryptocurrencies 2 ECTS
Bruno Biais

Blockchains are distributed ledgers. What does that mean? A ledger records ownership. The first blockchain was created for bitcoin. The blockchain ledger records the ownership of bitcoins. A ledger is distributed if it is maintained, in a decentralized manner, by the community of network participants. Until now, all large and actively used blockchains record ownership of cryptocurrencies.
In this short class, we will tackle two fundamental issues about blockchains:
- How is it possible for a ledger to be distributed? Nakamoto (2008) offered the first answer to that question. We will discuss and analyze it.
- What can be the value of a cryptocurrency?

To tackle these two issues, we will describe the workings of blockchains and cryptocurrency markets in practice, and we will use the tools of economics to analyze them.
The first part of the class will be devoted to blockchains. We will show how game theory can be used to analyze blockchain protocols.
The second part of the class will be devoted to cryptocurrencies. We will show how monetary economic theory can be applied to study the function and valuation of cryptocurrencies.
While, during the first and second parts of the class, I will present lectures, the third part of the class will bedevoted to students presentations of research articles (mostly empirical articles) on blockchains and cryptocurrencies.

Location: HEC, Jouy-en-Josas
Semester: 4
Hours: 12

Topics in Asset Pricing 3 ECTS
Thierry Foucault

- Market anomalies (excess volatility, predictability, reversal, momentum, violation of the law of one price)
- Risky arbitrage (fundamental risk, noise trader risk, bubbles, market timing)
- Constrained arbitrageurs (leverage constraints, capital constraints)
- Incentives (risk shifting, tail risk, herding)
- Behavioral finance (loss aversion, heterogeneous beliefs, extrapolative expectations, limited attention).

Location: HEC, Jouy-en-Josas
Semester: 4
Hours: 18

Market Microstructure 3 ECTS
Stefano Lovo (Course closed in 2019-2020)

The purpose of the course is to acquaint students with market microstructure.
This course present some auction theory tools used in financial markets microstructure. It then presents the main models of market microstructure analyzing the role of risk aversion and private information in the process of price formation. The last part of the courses is dedicated to specific topics such that herd behavior in the stock market and robust price formation.

Location: HEC, Jouy-en-Josas
Semester: 4
Hours: 18

Econometrics of Commodity and Asset Pricing 3 ECTS
Alain Monfort

- Discrete time affine processes, Laplace transforms
- Discrete time asset and commodity pricing, risk neutral dynamics
- Econometrics of forwards, futures, convenience yields
- Interest rates models, switching regimes, zero lower bound, lift-off, default
- Statistical inference in affine and quadratic interest rate models
- Credit risk models, credit VaR, credit event pricing
- Option pricing, truncated Laplace transforms
- International modeling, Wishart processes.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 18

Specialized Courses

Dynamics of Information and Communication in Games 4 ECTS
Tristan Tomala

- Models of strategic information transmission
- Sender-receiver games: cheap talk and Bayesian persuasion
- Mediated communication: communication and correlated equilibria
- Long-term interactions and Folk Theorems
- Long-term sender-receiver games: persistent private information, information renewal
- Information transmission over communication networks.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Advanced Decision Sciences 4 ECTS
Mohammed Abdellaoui

- Preference relations on Cartesian Products and Properties
- Substitution consistency (Wakker, 2010)
- Additive preferences
- Application to Expected Utility (Savage) and Intertemporal Choice (Koopmans)
- Original Prospect Theory (Kahneman and Tversky, 1979)
- Prospect theory for risk and elicitation techniques
- Prospect theory for Ambiguity and elicitation techniques
- Eliciting Ambiguity Attitudes under Prospect Theory.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Cooperative Games, Theory and Applications 2 ECTS
Yukihiko Funaki

- Introduction, definition of cooperative game
- Core
- vNM stable set
- Nucleolus and Bankruptcy game
- Shapley value
- Consistency
- Monotonicity and related solutions
- Cooperative Game Experiment (substitute for NTU game).

Location: ENSAE, Palaiseau
Semester: 3
Hours: 12

Social Choice and Voting 4 ECTS
Yukio Koriyama, Micael Canstanheira

This course aims to study normative and strategic analysis of social decision making. Collective decision making is ubiquitous and plays a crucial role in our society. In normative analysis, we learn desirable properties of the decision rules when individual preferences are aggregated to a collective decision. In strategic analysis, we learn how the quality of collective decisions depends on decision rules inducing various types of incentives at the individual level. We will study a variety of applications in real-life examples. A leading example will be voting, which plays a foundational role not only in democratic but also economic and political decision makings.

Social choice theory
- Arrow’s model,
- Social choice function,
- Social welfare function,
- Strategy-proofness (Gibbard-Satterthwaite),
- Comparison of voting rules (simple majority, Borda, Condorcet, Approval voting, Majority judgment).
Collective decision making
- Information aggregation,
- Condorcet Jury Theorem,
- Poisson Games (and other refinement models),
- Apportionment problems,
- Strategic voting,
- Rational voting models,
- Group-based models,
- Testing rationality.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Specialized Courses

Consumer Economics and Pricing Strategies 4 ECTS
Claire Chambolle, Philippe Choné, Laurent Linnemer

- Seller reputation and advertising behavior.
- Economics of retailing.
- Dynamic pricing and revenue management.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

From Micro to Macro via Firms as Organizations : Firm Dynamics Analysis 2 ECTS
Claire Lelarge

This course aims at presenting the main tools proposed by economists to understand why firms emerge as organizations, why they are heterogeneous and what are the implications for policy interventions.
1. The empirical toolbox: What do we know about firm heterogeneity? (productivity estimation, demand and mark-ups, empirical analysis of networks)
2. The theoretical toolbox: several theories of the firm of the literature (transaction costs, property rights, span of control, risk aversion,
hierarchies)
3. Frictions and misallocation: firm heterogeneity, taxes and other wedges, and the allocation of production factors. Focus on the sufficient statistics approach of these issues.
4. Market structure (input, output, financial) and fluctuations/industry dynamics. Focus on several “endogenous decisions” affecting these outcomes: innovation (R&D), quality of management, consumer search.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 12

Competition Policy in Practice: Cases 4 ECTS
Thibaud Vergé

- Vertical contracting in online platforms
- Horizontal mergers
- Information exchanges
- Exclusionary practices (e.g., tying/bundling, rebates)
- Private damages.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Specialized Courses

Trade and Development Policies 4 ECTS
Margherita Comola, Felipe Starosta de Waldemar

- Economic development: structural transformation as a determinant
- Product Space and Economic Complexity: approaches to study structural transformation
- Low income Countries
- Trade and development
- Capital flows to developing countries
- Macro/microeconomic determinants and impacts of aid and foreign direct investments
- Macro/microeconomic determinants and impacts of migration and remittances.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Firms in the Global Economy 2 ECTS
Isabelle Méjean

- Firms in the global economy.
- Large firms, granularity and aggregate fluctuations.
- Firm-to-firm production networks and the international propagation of shocks.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 12

Transportation Economics and Location Theory 4 ECTS
André de Palma (Course closed in 2019-2020)

- Location theory and applications.
- Urban Economics: toy models; large-scale LUTI models.
- Static traffic model (theory and toy models, large scale models).
- Road pricing, parking pricing, regulation and self-financing.
- Dynamic models: theory and applications.
- Congestion in public transportation.
- New technologies, big data and new tools to study Mobility.
- Autonomous car: general introduction and analytical approach.
- Mobility Permits :Tripod and Trinity projects (MIT-Singapore Alliance).
- Individual versus collective decision making.
- Discrete choice models (theory and applications).
- Future Mobility surveys.
- Individual incentives (theory, relation with Marginal Cost Pricing).
- Risk and uncertainty: value of information and Value of reliability.
- Econometric applications.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Factor Mobility in a Global Economy 4 ECTS
Farid Toubal

- Firms and multinational production: theory and evidence
- Horizontal models, heterogeneity in total factor productivity, fragmentation and global value chains
- Internalization versus integration in a globalized world
- Granularity and impact on aggregate outcomes.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Specialized Courses

Intertemporal Choice: Theory and Applications 4 ECTS
Nicolas Drouhin

Part 1: General introduction
- Optimal control in economics and management
- A two period model of intertemporal Choice
- Mathematical prerequisites
Part 2: Optimal control
- Basic problem: necessary and sufficient condition for optimality
- Free endpoint end free ending time problems, scratch values
- Constraints on the state and control variables
- Infinite horizon
- Multidimensional problem
Part 3: Various topics in life cycle theory
- Consumption vs investment: a continuous time Fisherian separation theorem
- Education
- Health
- Uncertain lifetime
- Labor and Social security
Part 4: Various topics in behavioral intertemporal choice
- A brief introduction to the axiomatic of intertemporal preferences
- Time consistency
- Memory and Addiction.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Applied Macroeconometrics 4 ECTS
Aurélien Poissonnier, Olivier Simon

The course will focus on operational tools and methods used in macroeconometrics, in both empirical research and macroeconomic models. To this end, the course will be divided in lecture courses and computer sessions. Topics:
- Trend-cycle decomposition: HP filter, example of the output gap estimation...
- VAR models, Structural VARs, VECM: estimation, specification, impulse response function...
- Macroeconometric models: construction, estimation, standard uses...
- DSGE models and rational expectations: resolution method, estimation, examples...

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Structural Macroeconomics 2 ECTS
Edouard Challe

Location: ENSAE, Palaiseau

- The workhorse Dynamics Stochastic General-Equilibrium model.
- Labor market dynamics.
- Heterogenous households.
- Financing constraints.

Development Economics: a Macroeconomic Perspective 2 ECTS
Jean-Noël Senne

Objectives
This course tackles broad macroeconomic development issues. It mainly assesses the relative importance of capital flows to developing economies and particularly draws a comparative analysis of the effectiveness migration, remittances and foreign aid in promoting growth and alleviating poverty. After introducing the main stylized facts and theoretical background, the focus will be on their impact at the macro, meso but also micro-level using recent empirical evidence on these questions. This last part also tries to identify channels for development through institutions and governance in a globalized world.

Outline
1. International Migration, Remittances and Growth.
2. Foreign Aid and Growth.
3. Institutions Governance and Growth.

Keywords
Economic Growth, Capital flows to developing countries, International Migration, Remittances, Foreign Aid, Institutions, Governance.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 12

Information and Expectations in Macroeconomics 4ECTS
Gaetano Gaballo

This course provides an introduction to the literature on dispersed information in Macroeconomics. We will review the basic techniques of signal extraction in Gaussian environments. Then, we will apply them to Beauty Contest models to study how imperfect information can affect welfare. We will study a benchmark version of the Lucas' island model to demonstrate how dispersed signals can be micro-founded as competitive prices. Finally we will use our framework of learning from prices to provide simple models of price rigidity, endogenous persistence and sentiments.

I. Basics
• Gaussian Signal Extraction
• Measuring Information Acquisition
• Kalman Filter Logic
• Endogenous Signals

II. Learning from Prices and the Business Cycle
• Beauty Contest and Welfare
• Endogenous Rigid Prices
• Sentiments and Amplification
• Forward Looking Dynamics

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Specialized Courses

Catastrophic Risks, Cyber Risk and Insurance Markets 4 ECTS
Pierre Picard

Part 1: Three examples of insurance schemes for natural disasters
- Natural disaster insurance in France
- National Flood Insurance Program in the US
- Caribbean catastrophe Risk Insurance Facility
Part 2: Risk pooling, correlated risks, reinsurance and Alternative Risk Transfer
- The limits to risk pooling under correlated risks
- Mechanisms of reinsurance for catastrophic risks
- Transferring catastrophic risks to financial markets
Part 3: Insurance coverage and risk prevention
- Interaction between insurance, self-protection and self-insurance
- Equity and efficiency in insurance coverage schemes for natural disaster risks
- Insurance and liability for industrial risks.

Location: ENSAE, Palaiseau
Semester: 3
Hours: 24

Economics of Energy Markets 3 ECTS
David Benatia

This course presents institutional, theoretical and empirical aspects of the economics of energy markets and environmental regulation.
The first part examines the economic aspects of electricity markets.
The second part presents the fundamentals of primary energy markets through the theory of exhaustible resources, and the empirical aspects of crude oil and retail gasoline markets.
The third part focuses on environmental regulation and the energy transition through the lens of European objectives.

Topics covered include: natural monopoly, vertical integration, price regulation, regulation of networks, peak-load pricing, market power, antitrust regulation, pay-as-bid vs uniform price multi-unit auctions, supply function equilibria, transmission congestions, the effect of forward contracting, demand-response, capacity markets, Hotelling rule, oil prices, mergers, environmental taxes and cap-and-trade regulation, the effects of environmental regulation, pass-through of emissions pricing, energy effciency, rebound effect, energy transition, and renewable energy policies.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 18

Topics in Behavioral Political Economy 2 ECTS
Allan Drazen

This course will focus on integrating recent strands of behavioral economics into models of political economy. The area is sufficiently new that there is not even agreement about what it includes. We will look at both the basis for behavioral approaches and at specific questions and topics, using theoretical models and results from laboratory experiments. The course will look at some or all of the following subjects, focusing on voter and politician behavior: general modeling of non-selfish preferences; bounded rationality; cognitive biases and context effects; overconfidence; aspiration-based adaptive rules; political participation and voter turnout; polarization; and experimental evidence.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 12

Behavioral Insurance 4 ECTS
François Pannequin

- Insurance demand under risk and ambiguity; interaction between insurance and prevention (self-insurance and self-protection); consequences for public policies
- Insurance Markets in the presence of adverse selection; lessons for Public Policy; impact of Risk Attitudes (risk aversion and risk loving)
- Behavioral Insurance, Risk Aversion, Ambiguity Aversion
- Experimental tests designed for insurance theory (Demand models, Market models).

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Specialized Courses

Randomized Methods and Policy Evaluation 4 ECTS
Bruno Crépon

Location: ENSAE, Palaiseau
Semester: 3
Hours: 24

Economics of Education and Human Capital 4 ECTS
Christian Belzil

- Introduction to earlier models of Becker, Ben-Porath and Mincer
- The Roy Model
- Market Imperfections, Liquidity Constraints, Risk and Human Capital
- Empirical Studies (Returns to Education, test for the presence of liquidity Constraints)
- Structural Dynamic Schooling Models
- Sorting between public and Private Schools
- Cognitive Achievements and Child Development
- Macroeconomic Models: evolution of education and productivity, life-cycle inequality.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Development Microeconomics 2 ECTS
Anett John

The goal of this course is to study why extreme poverty, poor health, low education levels, and a reluctant adoption of modern technologies are persistent in the developing world. Which market failures and distortions, institutional failures and behavioral biases prevent households from improving their situation, and countries from getting richer? Which policies work, which ones do not, and why?
The course will focus on microeconomic questions: Rather than studying countries, we will seek to understand decision-making at the level of individuals or households. The course presumes familiarity with basic economic theory and econometric methods.

Chapter 1. Introduction: The Economics of Development
Chapter 2. Education
Chapter 3. Health and Nutrition
Chapter 4. Microcredit
Chapter 5. Microsavings & Intra-Household Bargaining
Chapter 6. Technology and Learning

Location: ENSAE, Palaiseau
Semester: 3
Hours: 12

Urban Labor and Housing Markets 4 ECTS
Benoît Schmutz

- Discrimination, Segregation and Spatial Mismatch
- Economic and Social Interactions between Cities
- Search Frictions: a Spatial Perspective
- (In)consistent Employment and Housing Policies.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Specialized Courses

Econometrics of Panel and Duration Data (Econometrics 3) 4 ECTS
Laurent Davezies, Arne Ulhendorff

- Refresher and further study of linear panel data models with large N and fixed T: strong and weak exogeneity, state dependence, properties and specification of correlated random effects models, clustering and quasi maximum likelihood approach.
- Non-linear panel data models for large N and fixed T : focus on binary choice models (logit, probit), incidental parameters, estimation of parameters of interest (index and average marginal effects), sufficient statistics approach and (quasi) maximum likelihood.
- Bias correction methods, functional differencing.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

GARCH and Stochastic Volatility Models 3 ECTS
Christian Francq

- Financial returns and GARCH models
- Strict and second-order stationarity, conditional heteroskedasticity, volatility clustering, skewness and leptokurticity, weak ARMA presentation of the squares
- Leverage effect and asymmetric GARCH models, TARCH and EGARCH
- Test for ARCH effects, model identification, and asymptotic properties of the quasi-maximum likelihood estimator (QMLE)
- Stochastic volatility models, Markov-switching models.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 18

Machine Learning for Econometrics 4 ECTS
Bruno Crépon, Christophe Gaillac, Jeremy l'Hour

This course covers recent applications of high-dimensional statistics and machine learning to econometrics, including variable selection, inference with high-dimensional nuisance parameters in different settings, heterogeneity, networks and text data. The focus will be on policy evaluation problems. Recent advances in the econometrics of policy evaluation such as the synthetic control method and Directed Acyclical Graphs (DAG) will be reviewed. If time allows, the course will also review optimal policy estimation and learning.

Location: ENSAE, Palaiseau
Semester: 4
Hours: 24

Dynamic Statistical Models with Hidden Variables 3 ECTS
Jean-Michel Zakoian

- Definitions and examples: Stationary processes, ARMA and ARIMA models; random variance models, Hidden-Markov models, State-space models
- The Kalman Filter: general form, prediction and smoothing, the stationary case, statistical inference, examples
- Markov-switching models: finite-state Markov chains, Hidden-Markov models, Markov-switching ARMA models, estimation of the MS-AR(p) model
- Bayesian and simulated methods: Bayesian inference and MCMC, simulation by acceptance-rejection, the Metropolis-Hastings and Gibbs algorithms, examples: STAR model, stochastic volatility model.

Location: ENSAE, Palaiseau
Semester: 3
Hours: 18