Research Interests

Macro and Monetary Economics, International Economics, Applied Time-Series, Machine Learning

Working Papers

Monetary Policy under Data Uncertainty: Interest-Rate Smoothing from a Cross-Country Perspective [media coverage][AEA2021][EWMES21], submitted

Cross-country estimates of Taylor rules suggest that higher data uncertainty is associated with more inertial behavior of interest rates. Data uncertainty is measured by the volatility of differences between real-time data and revisions thereto. Using a simple structural model with Kalman filter learning to replicate the cross-country pattern of the inertial behavior, we show that inertial behavior increases not because central banks gradually adjust interest rates in the face of data uncertainty, but because their inferences about the true data are correlated with past interest rates. The inertial behavior of interest rates is thus endogenized as resulting in part from the learning process.

The Role of Economic Policy Uncertainty in Outward Foreign Direct Investment (with Yuhyeon Bak), R&R at Journal of International Money and Finance

This paper investigates the effects of relative economic policy uncertainty (EPU) on outward foreign direct investment (FDI) from South Korea to 21 host countries. We develop a theoretical model for the relationship between uncertainty and outward FDI and estimate the dynamic effects of the relative EPU on FDI outflows using the dynamic panel and panel VAR models. We find that a relatively high EPU in the home country significantly contributes to increased outward FDI. When a one-percent relative EPU shock occurs, FDI outflow peaks in the fifth quarter, with the accumulated response of FDI outflows rising approximately 1.43%, then gradually decreasing over the next quarters.

Dynamic Coupling of the U.S. and Canadian Industrial Production Indices, submitted

We study the coupling of the United States and Canada's industrial production indices using a non-linear autoregressive model. Estimating the exponential smooth transition autoregressive (ESTAR) model in the literature is improved with an expanded set of specifications. We identify the dynamic linkage between the United States and Canada and evaluate the forecast performance of each model. The results show the non-linear autoregressive model with bilateral trade linkage to outperform other models suggested by existing studies.

Macroeconomic Conditions and Wage Inequality: Expanding and Analyzing the Worldwide Dataset, submitted

This paper creates a unique worldwide dataset that permits the study of wage inequality and returns to education in 40 countries and revisits earlier studies of the effects of economic development (the Kuznets hypothesis), trade openness, and returns to skill on wage inequality. We find that (i) real GDP per capita is negatively related to wage inequality and returns to education, (ii) trade openness is positively related to wage inequality and returns to education, (iii) levels of wage inequality and levels of returns to education are positively related, and (iv) changes in wage inequality and changes in returns to education are negatively related, and it describes an interesting phenomenon that an acceleration of skill-biased technological change drives a deceleration of wage gap widening process.

Works in Progress

• Central Bank Swap Lines and Currency Internationalization in Trade (with Yang Jiao, Ohyun Kwon, and Shang-Jin Wei)

Does Globalization of RMB Facilitate International Trade? (with Yang Jiao and Ohyun Kwon)

Exchange Rate Pass-through to Export Prices: The Role of Foreign Currency Debt (with Junhyong Kim and Annie Soyean Lee)

• Machine Learning Approach to FOMC Sentiment Analysis (with Hope Hyeun Han)

• College Education, Occupational Sorting, and International Trade (with Soo Hyun Oh)

Journal Article

The Cyclical Behavior of Household and Corporate Credit in Emerging Economies (with Seung-Gyu Sim), Emerging Markets Review 45, December 2020. [SSRN]

Standard consumption-investment theory predicts counter-cyclical (pro-cyclical) behavior of household (corporate) credit whereby households' consumption smoothing and firms' investment motives are aligned. Counter to the theoretical symbiosis consistent with U.S. data, we demonstrate not only in South Korea, but also in 19 emerging economies that the pro-cyclical behavior of household credit dominates that of corporate credit. Our analysis further reveals that dominant, pro-cyclical household credit accompanied by (collateral) assets and fueled by external debt generates counter-cyclical behavior in interest rates, amplifies credit market fluctuation, and hinders the growth of small- and medium-size businesses in the South Korean economy.

Other Research Work

• Reframing for New Insights and Opportunities (with Joonhwan In, Young-Choon Kim, MinChung Kim, and Hope Hyeun Han), Hankyungsa, 2020.

Doctoral Dissertation

• Essays in Macroeconomics

University of Wisconsin - Madison,  April 2019