Research Interests

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

Working Papers

• Corporate Dollar Debt and Global Trades: The Role of Firm Heterogeneity (with Junhyong Kim and Annie Soyean Lee)    New 

This paper investigates the role of dollar debt and firm heterogeneity in shaping the exchange rate pass-through to global trades. We employ a unique dataset that combines detailed firm-level balance sheet information with transaction-level Korean customs data. Our findings reveal that after the 1997 devaluation, small exporters with higher levels of foreign currency debt tend to reduce their export quantities and raise their prices. In contrast, for large exporters, higher foreign currency debt results in higher export quantities and lower prices. The heterogeneous price and quantity responses across firm size may stem from financial frictions that smaller firms face, unlike large firms. Small firms burdened by foreign currency debt face tighter financial constraints, which limit their production. Large firms, however, may experience less disruption in their production even when highly exposed to foreign currency debt. Consequently, they could increase their exports to generate more cashflows, even if it means sacrificing future cash flows, particularly when they require liquidity due to high levels of foreign currency debt. The panel data analysis from 2001-2020 confirms the relevance of the financial channel of dollar debt in the exchange rate pass-through to export prices and quantities in more recent periods.

• Does RMB Internationalization Promote Cross-Border Trade? (with Yang Jiao and Ohyun Kwon)    New 

This study offers the first empirical evidence, using firm-level Korean Customs data, to explore how the internationalization of RMB (IoR) influences cross-border trade with China. We find that exports to China invoiced partially or fully in RMB experience notably faster growth. Additionally, firms utilizing RMB invoicing show faster export growth to China. By employing an instrumental variable approach, we address potential endogeneity concerns and affirm the robustness of our empirical findings. Guided by a currency invoicing model that decomposes the aggregate trade effects into several components, we empirically demonstrate that the increase in trade volume is primarily driven by Chinese importers benefiting from lower currency costs when purchasing RMB-invoiced goods, as opposed to those invoiced in USD.

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

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

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.

• Central Bank Swap Lines, Bank Risk Management and Currency Choice in Trade (with Yang Jiao, Ohyun Kwon, and Shang-Jin Wei), paper available upon request

Works in Progress

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

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

• ChatGPT, You Screwed Me for the Exam! (with Michael Burrell and Molan Kim)

Journal Articles

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

• Macroeconomic Conditions and Wage Inequality: Expanding and Analyzing the Worldwide Dataset, Annals of Economics and Finance 24(2), 2023. [SSRN]

Other Research Works

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

• Economic Impact of UNIST (with UNIST indicator research team), UNIST, May 2022.

Doctoral Dissertation

• Essays in Macroeconomics

University of Wisconsin - Madison,  April 2019