Professor Víctor Ríos-Rull and Doctor Wei Cui

This is a course of the part of Modern Macroeconomics that deal with heterogeneous agents. Its purpose is not only to make students aware of this part of macro but to make them capable of using the theory for their own applications.
The course has two parts.
A first part taught by Victor for a total of 12 hours that introduces rationale for heterogeneity, lays out the basic (Bewley/Imrohoroglu/Huggett/Aiyagari) model and goes over a few topics.
There will be a home page for the first part of the course here that is still incomplete and that will be edited as we go along.
The second part will be taught by Wei and will go over additional topics.

Course Timing: When and Where

Victor will have (in principle) 4 sessions for a total of 12 hours each. The first one on Wed Nov 27 9-1 in 321 Drayton. Then, a subset of Fri Nov 29, Fri Dec 6 and Fri Dec 13 at Malet Place Engineering Building 1.20 9:00-12:00pm, Taviton (16) 431 12:00 to 1:00 pm, and Birkbeck Gordon Sq (43) 124, from 2:00-4:00 pm. There is still a possibility of Wed Dec 4.
More details will be available in the home page of the course as we go along.
Wei will spend 15 hours in Term 2 in the spring. We will meet every Monday 17:00 - 20:00 from Jan 20th 2020 for 5 times.


This is a course with the aim of both opening a window into parts of modern quantitative macroeconomics and an invitation to join. We will discuss why heterogeneity is important and how to implement it. In particular we will look at how to advance in getting wages (including relative wages) to be an output of the model. We will also look at housing and household leverage, how to think of what it does to people and how it shapes aggregates. We will also worry about how to model fluctuations and, in particular, what could be its causes.
The course is also going to be flexible, this is, we will respond to some extent to the needs and interests of the participating students. The whole point is for attendants to get something out of it.
Finally, throughout the course we will put special emphasis on discussing what is a research project, how we use models to answer quantitative questions and how to interpret the outcome of models.


  1. Introduction Main Questions in Macro. Why Heterogeneity.
  2. Intro to Heterogeneity: Measure Theory; The Hopenhayn Model.
  3. The General Macro Model with Heterogeneity: A stationary Aiyagari Economy. Rationales for Inequality.
  4. Towards a joint Theory of Earnings and Wealth: Wage determination.
  5. (Unsecured) Credit, including the role of credit scoring.
  6. Housing and its Finances.
  7. Crisis triggered by Credit Problems: Endogenous Productivity. Reallocation of Resources. Wage determination.
  8. Banking in Partial and in General Equilibrium
  9. Models of Household versus individuals: Marriages and coexistence of household heads and marginal family members.
  1. Recent Discussion on Government Policies in Heterogenous Agents Framework
  2. Financial Frictions and Asset Liquidity

Recent Discussion on Government Policies in Heterogenous Agents Framework

Bhandari, Anmol, David Evans, Mikhail Golosov, and Thomas J. Sargent (2017): "Public Debt in Economies with Heterogeneous Agents," Journal of Monetary Economics.

Cui, Wei and Vincent Sterk (2019) "Quantitative Easing," working paper, available at:

McKay, Alisdair and Ricardo Reis (2016): "The Role of Automatic Stabilizers in the U.S. Business Cycle," Econometrica, vol 84(1), pp. 141-194.

Kaplan, Greg, Benjamin Moll, and Giovanni L. Violante (2017): "Monetary Policy According to HANK," American Economic Review, vol 108(3), pp. 697-743.

Rocheteau, Guillaume, Pierre-Olivier Weill, and Tsz-Nga Wong (2018): Ä Tractable Model of Monetary Exchange with Ex-post Heterogeneity," Theoretical Economics, vol 13(3), pp. 1369-1423.

Rocheteau, Guillaume, Pierre-Olivier Weill, and Tsz-Nga Wong (2019): Än Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment," NBER Working Paper 25220.

Heterogenous Firms, Financial Frictions, and Asset Liquidity

Bassetto, Marco, and Wei Cui (2018): "The Fiscal Theory of Price Level in a World of Low Interest Rates." Journal of Economic Dynamics and Controls, vol 89, pp. 5-22

Bernanke, Ben S., Mark Gertler, and Simon Gilchrist (1999): "The financial accelerator in a quantitative business cycle framework." Handbook of macroeconomics, pp. 1341-1393.

Caggese, Andrea (2007): "Financing Constraints, Irreversibility and Investment Dynamics," Journal of Monetary Economics, vol 54, pp.2102-2130

Cui, Wei (2016): "Monetary-fiscal Interactions with Endogenous Liquidity Frictions," European Economic Review, vol 87, pp. 1-25.

Cui, Wei (2018): "Macroeconomics of Delayed Capital Liquidation," working paper, available at:

Cui, Wei and Soeren Radde (2019): "Search Based Endogenous Asset Liquidity and the Macroeconomy," Journal of European Economic Association

Jermann, Urban, and Vincenzo Quadrini (2012). "Macroeconomic Effects of Financial Shocks," American Economic Review, vol 102(1), pp.238-71.

Kiyotaki, Nobuhiro (1998): "Credit and business cycles," Japanese Economic Review, vol 49(1), pp. 18-35.

Kiyotaki, Nobuhiro, and John Moore (1997): "Credit Cycles," Journal of Political Economy, vol 105(2), pp. 211-248.
Kiyotaki, Nobuhiro, and John Moore (2008): "Liquidity, Business Cycles, and Monetary Policy" Journal of Political Economy, forthcoming.


It would be great to have some student presentations of papers during some of the lectures. We would agree on the topic being presented.

File translated from TEX by TTHgold, version 4.00.
On 25 Nov 2019, 10:08.