• KDI Journal of Economic Policy
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• 제42권4호
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• pp.59-90
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• 2020

U.S. monetary policy has been claimed to generate global spillover and to destabilize other small open economies. We analyze the effects of certain identified U.S. monetary shocks on gross capital flows in the Korean economy using the local projection method. Consistent with previous results on other small open economies, we initially confirm that U.S. interest rate hikes are dynamically correlated with foreign outflows and residents' inflows. That is, not only are they correlated with withdrawals by foreigners but they are also correlated with those by domestic (Korean) investors. The results are mostly driven by portfolio flows. Second, however, the marginal response to a U.S. monetary policy shock is, on average, subdued if we focus on the sample periods after the Global financial crisis of 2007-2008 (henceforth, global financial crisis). We conjecture a possible reason behind the change, an institutional change related to financial friction. If the degree of pledgeability of the value of net worth increases, the marginal responses by both investors would drop with a U.S. monetary policy shock, consistent with our findings.

• East Asian Economic Review
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• 제17권2호
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• pp.129-159
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• 2013

Over the course of the recent global financial crisis, emerging economies experienced massive swings in capital inflows. In this paper, we estimate a VAR model to assess the impact of capital inflow shocks, which are identified using a set of sign restrictions, on house prices in Korea. We base the analysis on three alternative measures of capital inflows: net total inflows, net portfolio inflows and gross total inflows. The results suggest that capital inflow shocks have a significantly positive and persistent effect on real house prices. Although shocks to capital inflows are found to be substantially more important for Korean asset markets than for other OECD countries, their overall explanatory power is modest. Using regional house price data we also show that capital inflow shocks have an asymmetric effect on property markets across the seven largest Korean cities and across different parts of Seoul.

• The Journal of Asian Finance, Economics and Business
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• 제9권1호
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• pp.189-201
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• 2022

The study empirically examines the impact of monetary fundamentals along with global oil prices on the Pak-rupee exchange rate using the monthly data over 2001-2020. Employing the cointegrating vector autoregressive with exogenous variables (VARX) and vector error correction model with exogenous variables (VECMX), the study analyzes the impact of domestic monetary fundamentals while considering the foreign variables as weakly exogenous. In order to account for the structural breaks in the data, the Lagrange multiplier (LM) unit root test with two structural breaks has been used (Lee & Strazicich, 2003). The empirical results reveal that the domestic and foreign monetary variables significantly explain the exchange rate movements in Pakistan both in the long run and in the short run. The dynamic properties of the monetary model of exchange rate have been analyzed using the persistence profile analysis and generalized impulse response functions (GIRFs). The results reveal that the responses of shocks to domestic monetary fundamentals are consistent with the predictions of the monetary model of the exchange rate. Furthermore, being a net oil importer, a rise in global oil prices significantly depreciated the Pak-rupee exchange rate over the period of study. The global financial crisis (GFC) and pandemic (COVID-19) were also found to cause the Pak-rupee exchange rate depreciation.

• 경제분석
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• 제27권1호
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• pp.1-36
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• 2021

글로벌 안전자산으로서 미달러화의 위상을 고려할 때 미국 통화정책 등 글로벌 요인은 여타국 금융시장에도 상당한 영향을 미칠 수 있다. 이러한 가설에 대해 본고에서는 미국 통화정책이 국내 채권 및 외환스왑시장에 미치는 영향을 사건연구(event study)를 통해 살펴 보았다. 분석결과, 미국 통화정책은 국내 금리에 유의한 양(+)의 영향을 미치며, 특히 기간프리미엄 비중이 큰 장기물에 보다 큰 영향을 미치는 것으로 나타났다. 시기별로 살펴 보면 금융위기 이전에는 미국 통화정책과 국내 금리 간의 상관관계가 유의하지 않았으나, 위기 이후에는 뚜렷한 양의 관계를 보였다. 또한, 미 연준 통화정책의 기대충격은 우리나라의 단기 및 중기 국고채 금리에, 기간프리미엄충격은 장기 국고채 금리에 크게 영향을 미치는 것으로 분석되었다. 그리고 금융위기 이전에는 미국의 통화정책 충격에 대해 외환 스왑시장의 스왑레이트가 매우 민감하게 반응한 반면 위기 이후에는 유의한 반응을 보이지 않은 것으로 나타났다. 이는 미국의 통화정책 충격이 무위험 이자율 평형에 따라 금융 위기 이전에는 주로 스왑레이트 조정을 통해, 금융위기 이후에는 국내 금리 변화를 통해 국내금융시장으로 파급되었음을 시사한다.

• East Asian Economic Review
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• 제28권1호
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• pp.95-140
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• 2024

This study empirically investigates the international transmission of China's uncertainty shocks. It estimates a time-varying parameter Bayesian global structural vector autoregressive model (TVP-BGVAR) using time series data for 33 countries to evaluate heterogeneous international linkage across countries and time. Uncertainty shocks are identified via sign restrictions. The empirical results reveal that an increase in uncertainty in China negatively affects the global economy, but those effects significantly vary over time. The effects of China's uncertainty shocks on the global economy have been significantly altered by China's WTO accession, the global financial crisis, and the recent US-China trade conflict. Furthermore, the effects of China's uncertainty shocks, typically on inflation, differ significantly across countries. Moreover, Trade openness appears crucial in explaining heterogeneous GDP responses across countries, whereas the international dimension of monetary policy appears to be important in explaining heterogeneous inflation responses across countries.

• East Asian Economic Review
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• 제27권2호
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• pp.115-143
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• 2023

In this paper, we address how the monetary authority should react to financial market status and exchange rate movements in a small open economy New Keynesian model with financial frictions due to asymmetric information between savers and borrowers. We show that the small economy with financial frictions is more susceptible to the exogenous shocks under the fixed exchange rate regime than under the flexible exchange regime. The small economy experiences a more prolonged and deeper economic recession under the fixed exchange rate regime than under the flexible exchange rate regime. The monetary policy taking into account external finance premium is better than the interest rate rule without considering the financial market status.

• 경제분석
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• 제25권2호
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• pp.1-53
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• 2019

본 연구는 가계 일부가 부채 누적으로 신용시장에서 일정 한도 이상으로는 차입이 어려워 기간간 소비의 평활화(smoothing)에 제약을 받는 상황이 통화정책에 미치는 영향을 금융시장의 불완전성(incomplete financial markets)이 내재된 2주체 소규모 새케인지언 구조모형(Two Agents New Keynesian Model)을 통해 분석하고 있다. 생산비용 상승이라는 경제상황 변화가 있을 때 신용시장에서 차입한도제약을 받는 차입가계와 제약을 받지 않는 저축가계가 소비 및 노동공급에 대해 보이는 비대칭적 반응은 결국 두 가계간 통화정책 전달경로의 확장으로 이어진다. 물가갭과 생산갭을 동시에 고려하여 정책금리를 결정하는 신축적 물가목표 정책의 사회후생 수준은 차입가계 비중은 물론 모든 경제상황을 종합적으로 고려하여 정책금리를 결정하는 Ramsey 유형의 최적정책과는 비슷하고 순순하게 물가목표 달성만을 추구하는 엄격한 물가목표 정책의 사회후생 수준보다는 높았다. 이는 가계 일부가 차입한도제약을 받는 상황에서도 신축적 물가목표 정책이 여전히 유효함을 시사한다. 또한 생산비용 상승에 대하여 신축적 물가목표 정책과 최적정책 하에서 소비와 노동공급은 엄격한 물가목표 정책보다는 완만히 조정되는 것으로 나타났다.

• East Asian Economic Review
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• 제18권3호
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• pp.301-335
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• 2014

In this paper, we consider a small open economy under the New Keynesian model with unemployment of Gal$\acute{i}$ (2011a, b) to discuss the design of the monetary policy. Our findings can be summarized in three parts. First, even with the existence of unemployment, the optimal policy is to minimize variance of domestic price inflation, wage inflation, and the output gap when both domestic price and wage are sticky. Second, stabilizing unemployment rate is important in reducing the welfare loss incurred by both technology and labor supply shocks. Therefore, introducing the unemployment rate as an another argument into the Taylor-rule type interest rate rule will be welfare-enhancing. Lastly, controlling CPI inflation is the best option when the policy is not allowed to respond to unemployment rate. Once the unemployment rate is controlled, however, stabilizing power of CPI inflation-based Taylor rule is diminished.

• The Journal of Asian Finance, Economics and Business
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• 제9권1호
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• pp.153-166
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• 2022

The study estimates the Structured VAR and the Dynamic Stochastic General Equilibrium Model for the Vietnamese economy based on the new Keynesian model for small and open economies, with the output gap, inflation, policy interest rate, the Vietnamese exchange rate, and the inflation and interest rate in the United States. The paper aims to clarify the impulse response of the macro variables through their shocks. It offers to model the SVAR and DSGE processes, as well as describe why and how interest rate policy is important in the impulse response of macro variables like the output gap and inflation process. The study supports the central role of monetary policy by giving empirical evidence for the new Keynesian theory, according to which an interest rate shock causes the output gap to widen and inflation to decrease. Finally, the application of the DSGE model is becoming more and more popular in the State Bank of Viet Nam to improve its policy planning, analyzing, and forecasting policy towards sustainable and stable growth.

• The Journal of Asian Finance, Economics and Business
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• 제7권8호
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• pp.225-231
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• 2020

The paper aims to investigate the impact of trade integration on business cycle synchronization for the East Asian countries during 2005- 2017 based on the endogeneity hypothesis of Optimum Currency Area criteria. We test the determinants of business cycles by calculating bilateral trade, financial integration, and business cycle synchronization. Applying the system Generalized Method of Moments for dynamic panel data models, the results show that business cycle synchronization is highly associated with trade and financial integration. These findings confirm the endogeneity hypothesis that more trade integration will mitigate asymmetric shocks, and have a positive impact on the business cycle synchronization. The increased trade intensity and financial linkage lead to more correlated business cycles in East Asia. Apart from trade and financial integration, the trade structure differential, monetary policy similarity also influence the business cycle comovement. The significantly negative impact of trade structure differential on business cycle synchronization suggests that countries with less similar structures are more likely to undergo asymmetric shocks. The results also indicate that monetary policy matters for output comovement. This study recommends that the East Asian countries should focus on bilateral trade as well as financial integration with each other to reap benefits from the integration process.