Macro and Monetary Economics, International Economics, Applied Time-Series
• Monetary Policy under Data Uncertainty: Interest-Rate Smoothing from a Cross-Country Perspective [paper] [media coverage] [non-technical summary]
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.
• Household and Corporate Credit in Emerging Economies: Symbiosis or Competition? (with Seung-Gyu Sim and Daeyup Lee) [paper] [slides]
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 that the pro-cyclical behavior of both household and corporate credit in emerging economies, rationalized by households’ leveraged investing in domestic assets and followed by large responses in asset values, engenders competition between them and hinders the growth of small and medium businesses. Our empirical findings suggest another way of understanding the credit cycle puzzle in emerging economies, counter-cyclical behavior of real interest rate and large consumption volatility.
• Macroeconomic Conditions and Wage Inequality: Expanding and Analyzing the Worldwide Dataset [paper]
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.
Work in Progress
• Dynamic Coupling of the U.S. and Canadian Industrial Production Indices
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.