Research Interests

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

Working Papers

Monetary Policy under Data Uncertainty: Interest-Rate Smoothing from a Cross-Country Perspective [media coverage][AEA 2021 virtual presentation][EWMES21 virtual presentation]

Cross-country estimates of Taylor rules suggest that higher data uncertainty is associated with a more inertial behavior of interest rates. Data uncertainty is measured by the volatility of differences between real-time data and their revisions. Using a simple structural model with Kalman filter learning, I replicate the cross-country pattern of the inertial behavior. More inertial behavior results not because central banks gradually adjust interest rates in the face of data uncertainty, but because the central banks’ inference about the true data is correlated with past interest rates. Thus, I endogenize inertial behavior of interest rates as resulting in part from the learning process.

The Role of Economic Policy Uncertainty on Outward Foreign Direct Investments (with Yuhyeon Bak)

This paper investigates the effects of relative economic policy uncertainty (EPU) on outward foreign direct investments (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 the panel VAR models. We find that a relatively high EPU in the home country significantly contributes to increased outward FDI. When the relative EPU shock occurs, FDI outflow peaks in the fifth quarter and gradually decreases over the next quarters.

• Macroeconomic Conditions and Wage Inequality: Expanding and Analyzing the Worldwide Dataset [paper available upon request]

I create a unique worldwide dataset to study wage inequality and returns to education in 40 countries, and revisit earlier studies of the effects on wage inequality of economic development (the Kuznets hypothesis) and trade openness and returns to skill. The study finds 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, consistent with the conventional openness hypothesis, (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.

• Dynamic Coupling of the U.S. and Canadian Industrial Production Indices [paper available upon request]

This paper studies the coupling of industrial production indices of the United States and Canada using a non-linear autoregressive model. Estimation of the exponential smooth transition autoregressive (ESTAR) model in the literature is improved with an expanded set of specifications, and I 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.

Work in Progress

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

• Currency Choices in International Trades (with Yang Jiao, Ohyun Kwon, and Shang-Jin Wei)

Currency Choice in Trade, Foreign Currency Debt, and Exchange Rate Pass-Through (with Junhyong Kim and Annie Soyean Lee)

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

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