This course will examine the interaction between the performance of the economy and key financial markets- namely bonds, equities and foreign exchange. The approach to the topics will consist of a more pragmatic, "real-world" framework that focuses on the dynamics and "noisy" realities that often drive financial market behavior in the short-run and, often, over the medium-term. A basic analytical framework discussing those relationships will also be presented where appropriate. Special emphasis will be given on the bi-directional nature of the relationship between macro economic activity and markets, as well as on the destabilizing effect that the behavior of the latter can have on the economy. For example, the burst of the stock market bubble in 2000-2001 and its role in the 2001 recession, the stimulative effect on economic activity that a major and sustained bond market rally can engineer, etc.
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