There are 10 elective courses on offer, of which, students will choose 4 for credit (and are allowed to audit one or more of the remaining 6). Of the 10, 9 are divided into 3 streams of 3 courses each. A student is not required to, but may wish to, specialize in one of the 3 streams, and if he/she decides to do so, then he/she must take all 3 courses in that stream, and 1 additional course to complete the 4 for-credit courses.

- Finance
- Public Policy
- Data Analytics

**Data Analytics**

*Statistical Computing and Machine Learning*– Statistical computing and machine learning are techniques of recognizing patterns from data in order to develop statistical models. This course will teach students

- How to carry out Monte-Carlo simulations using R
- Neural network methods
- How to aggregate data in cluster analysis to uncover similarities in large data sets
- Stochastic vector machine regressions
- How to work with Decision trees and Boosted Regression trees to model statistical relationships

*Time Series Econometrics*– Many of the insights from the Core Econometrics course, which studies mostly cross-sectional data, carry over to situations where data are collected over time (e.g. financial data). However, time-series data present important challenges of their own. In this course, students will learn

- How to represent time series data as observations drawn from a stochastic processes with lag operators & The difference between stationary and non-stationary time series
- How to test whether a time series is stationary or non-stationary
- How to estimate models with non-stationary time series data, and how to work with integrated processes & How to estimate models with stationary time series data, and how to detect and address the problem of serial correlation in these model
- How to estimate the temporary and permanent effects of shocks in a macroeconomic or financial model using distributed-lag models
- How to apply the Box and Jenkins methodology for modelling the conditional mean of a macroeconomic time series
- How to estimate the volatility in financial markets using the autoregressive conditionally heteroscedastic (ARCH) and generalized conditionally heteroscedastic (GARCH) models
- How to estimate models with non-stationary time series data, and how to work with integrated processes
- How to estimate vector autoregression (VAR) and vector error-correction (VEC) models & How to infer from the impulse response function the effects of a particular policy intervention
- How to detect causality in VAR systems & How to perform univariate and multivariate forecasting exercises
- How to implement econometric estimation of time series models using the statistical software R

**Advanced Econometrics**– This course builds on the Core Econometrics course and will introduce students to techniques for handling panel data (which combines features of both cross sectional and time series data) and qualitative dependent or binary variables and for working with simultaneous equation models. In particular they will learn:

- The difference between Fixed effects and Random effects models
- How to obtain the reduced form from the structural form and estimate the parameters of the same using different approaches like 2SLS, IV, LIML etc.
- How to model situations where the dependent variable is binary or qualitative
- How to formulate and test hypotheses using the Lagrange Multiplier (LM) test, Wald test and Likelihood ratio test (LRT)
- How to do all this in R

**Finance**

*Financial Statements Analysis*– Careers in finance, marketing, consulting, entrepreneurship and public administration require proficiency with financial statements. This course will teach students

- How to construct and inter-relate the three main financial statements of a firm: the profit & loss statement, the balance sheet, and the cashflow statement.
- How to analyze a firm’s investment and operating activities via a reading of its financial statements.
- How to use the Balanced Scorecard in conjunction with EVA measures for strategic management of organizations.
- The economics of value creation
- Profitability analysis
- Credit analysis
- Equity analysis
- Current issues in financial reporting (viz. the cases of Enron and Satyam, off-balance sheet items, fraud, forensic accounting, bankruptcy detection)

*Corporate Finance*– In order to appreciate the importance of the financing function in a corporation, an in-depth knowledge of capital (or financial) structure is essential. In this course, students will learn:

- How different types of firms formulate their financial goals and objectives
- How different types of firms finance themselves
- How to link a firm’s financing decision to its investment decision
- Why the principal-agent relationship is key to understanding the capital structure decision
- Why the capital structure decision is important (theories such as Modigliani-Miller and CAPM)
- How to value financial securities using the principles of present discounted valuation
- How to trade off risk against expected returns
- Why a firm’s dividend policy is important
- How to analyze a firm’s dividend policy

*Measuring Risk in Equity & Fixed Income Markets*– Finance professionals need to have a sound understanding of how to assess risk in equity and fixed income markets. In this course, students will learn:

- How equity markets are organized and how they function
- How wealth is allocated between different financial assets
- How idiosyncratic risk is different from systematic risk
- The concept of Beta which captures the impact of correlation on portfolio risk
- How assets are priced
- How to measure portfolio performance using metrics such as Jensen’s alpha
- How bond markets are organized and how they function
- How to value debt securities
- How to calculate spot and forward rates
- How to determine interest rate risk using concepts such as duration and convexity
- What the term structure of interest rates is and why volatility matters

**Public Policy **–

*Public Policy of Development*– This course will provide an understanding of how economics can be used to understand development policies in the real world. Students will learn to analyze complex public policy issues in development as well as evaluate the impact of different policy approaches to a particular problem. In this course students will learn:

- What determines the decisions of poor households in developing countries?
- What are the different types of risks faced by poor households and how can we mitigate them?
- How do we make schools work better for poor citizens?
- How do we make poor citizens healthy?
- How do we analyze the effectiveness of microfinance on economic and social development?
- What is the scope for policy interventions in India and what policies have been tried out?
- How to evaluate the impact of public programs using modern empirical methods in economics, such as Randomized Control Trials (RCTs).

*International Political Economy*– International Political Economy studies the intricate relationships between markets and states, between money and power, and between economics and politics, and is essential for students hoping to find employment in public policy roles in today’s global context. In this course students will learn:

- Why policymakers must pay attention to the interplay between economics and politics in designing effective policy
- What the main economic theories of trade are, and why these theories prescribe that countries should liberalize trade
- Why countries often choose not to liberalize trade, and what forms trade cooperation has in fact taken in the last 100 years
- What the main economic theories of FDI are
- How countries compete to attract multinational corporations
- Why China’s accession to the WTO in 2001 is a significant event in the history of multilateral trade liberalization
- What the Trans-Pacific Partnership means for its signatories and for those who have chosen not to sign the TPP
- What the political-economic considerations for liberalizing international finance are (with particular reference to the Euro project and its apparent failure)
- The fundamental principles of exchange rate economics, and why global financial stability requires the intervention and oversight of multilateral institutions such as the IMF

*Behavioural and Experimental Economics*: This course introduces the major insights of behavioral and experimental economics to individual choice, social choice, and public policy. The course will first establish fundamental principles in behavioural and experimental economics. The last module of the course will explore the cutting-edge research in behavioral and experimental economics and its implications for public policy. In this course students will learn

- How to critically assess existing theories in economics using experimental data and understand behavioural basis for the same.
- How to explore theories in behavioural economics and assess their applicability.
- How to use behavioral insights to inform individual, household, and social decision-making.
- How to review complex public policy problems through the lens of principles of behavioural economics.
- How to analyze data from experiments to evaluate and fine tune policies that could not be easily tested with naturally occurring data.

*Crises*– The 2008 Global Financial Crisis highlights the importance of understanding the myriad ways in which financial and macroeconomic systems are susceptible to episodic collapse. This course will teach students:

- A brief history of financial crises during the last 100 years
- How, in most of those cases, crises were precipitated by macroeconomic mismanagement leading to the buildup of speculative asset price bubbles
- How speculative asset price bubbles form (via a classroom experiment designed to simulate bubble formation)
- The specific features of the 2008 Global Financial Crises, especially the role of structured finance, the malfunctioning of debt markets, and the over-leveraging of financial institutions
- How a financial crisis causes economic activity to collapse, with specific reference to the examples of Japan after 1991, and the US and Europe after 2008
- How a financial crisis causes economic activity to collapse, with specific reference to the examples of Japan after 1991, and the US and Europe after 2008
- What kinds of preemptive policies can prevent the buildup of speculative asset price bubbles
- What kinds of post-crisis policies can prevent the collapse of economic activity
- How to analyze the current world economic scenario where a new crisis originating in China or some other emerging market may erupt

The 10th course, Crises, does not fit neatly within any one stream, but students who specialize in the Finance or Public Policy streams may consider it as their 4th for-credit elective course since the course has elements of both finance and public policy. Alongside the three courses in each stream, students will also be offered Workshops/Econ Labs. These are not required for credit, but students specializing in a stream are strongly advised to attend the Workshops/Econ Labs being offered in that stream, as these will illustrate some of the principles taught in that stream and also offer additional training that is often required for jobs in the arena of that stream.