• East Asian Economic Review
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• v.24 no.2
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• pp.165-184
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• 2020

Applying Ismailov and Rossi (2018), I newly construct the Korea FX uncertainty based on the density distribution of historical forecast errors. This uncertainty index properly captures the rare but significant events in the Korean currency market and provides information distinct from other uncertainty measures in recent studies. I show that 1) FX uncertainty arising from unexpected depreciation has a stronger impact on Korea-U.S. exchange rates and that 2) macro variables, such as capital flows or interest rate differentials, have predictive ability regarding Korea FX uncertainty for short horizons. These findings enable us to predict the events of sudden currency crashes and understand the Korea-U.S. exchange rate dynamics.

• The Journal of Industrial Distribution & Business
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• v.10 no.1
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• pp.29-37
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• 2019

Purpose - We study the dynamic linkages of the economic policy uncertainty (EPU) in the US on the manufacturing stock market returns in Korea. In detail, we examine the casual link between EPU index in the US and the manufacturing stock indexes in Korea. Research design, data, and methodology - We measure mainly the distribution effect of the US EPU on the manufacturing stock market in Korea of 1990-2017 by the vector error correction model (VECM). Result - In result, we estimate the impact of the US EPU index has significantly a negative response to the manufacturing stock market in Korea such as non-metal stock index, chemical stock index, food stock index, textile·clothes stock index, automobile·shipbuilding stock index, machinery stock index, steel·metal stock index. Also the remaining variables such as electric·electronics stock index, S&P 500, and producer price index in Korea have a negative relationship with US EPU index. Conclusions - We find out that the relationship between EPU index of the US and the manufacturing stock market in Korea has the negative relationships. We determine the EPU of the US has the spillover effect on the industry stock markets in Korea.

• Journal of Distribution Science
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• v.11 no.10
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• pp.73-79
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• 2013

Purpose - This study examines the impact of oil price volatility on economic activities in Korea. The new millennium has seen a deregulation in the crude oil market, which invited immense capital inflow into Korea. It has also raised oil price levels and volatility. Drawing on the recent theoretical literature that emphasizes the role of volatility, this paper attends to the asymmetric changes in economic growth in response to the oil price movement. This study further examines several key macroeconomic variables, such as interest rate, production, and inflation. We come to the conclusion that oil price volatility can, in some part, explain the structural changes. Research design, data, and methodology - We use two methodological frameworks in this study. First, in regards to the oil price uncertainty, we use an Exponential-GARCH (Exponential Generalized Autoregressive Conditional Heteroskedasticity: EGARCH) model estimate to elucidate the asymmetric effect of oil price shock on the conditional oil price volatility. Second, along with the estimation of the conditional volatility by the EGARCH model, we use the estimates in a VECM (Vector Error Correction Model). The study thus examines the dynamic impacts of oil price volatility on industrial production, price levels, and monetary policy responses. We also approximate the monetary policy function by the yield of monetary stabilization bond. The data collected for the study ranges from 1990: M1 to 2013: M7. In the VECM analysis section, the time span is split into two sub-periods; one from 1990 to 1999, and another from 2000 to 2013, due to the U.S. CFTC (Commodity Futures Trading Commission) deregulation on the crude oil futures that became effective in 2000. This paper intends to probe the relationship between oil price uncertainty and macroeconomic variables since the structural change in the oil market became effective. Results and Conclusions - The dynamic impulse response functions obtained from the VECM show a prolonged dampening effect of oil price volatility shock on the industrial production across all sub-periods. We also find that inflation measured by CPI rises by one standard deviation shock in response to oil price uncertainty, and lasts for the ensuing period. In addition, the impulse response functions allude that South Korea practices an expansionary monetary policy in response to oil price shocks, which stems from oil price uncertainty. Moreover, a comparison of the results of the dynamic impulse response functions from the two sub-periods suggests that the dynamic relationships have strengthened since 2000. Specifically, the results are most drastic in terms of industrial production; the impact of oil price volatility shocks has more than doubled from the year 2000 onwards. These results again indicate that the relationships between crude oil price uncertainty and Korean macroeconomic activities have been strengthened since the year2000, which resulted in a structural change in the crude oil market due to the deregulation of the crude oil futures.

• East Asian Economic Review
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• v.27 no.1
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• pp.33-60
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• 2023

This paper analyzes the entire distribution of stock market returns/volatility in five emerging markets (ASEAN5) and figures out the conditional distribution of the CHI_EPU index. The aim is to examine the impact of CHI_EPU on the stock returns/volatility density of ASEAN5 markets. It also examined whether changes in CHI_EPU explain returns at higher or lower points (abnormal returns). This paper models the behaviour of stock returns from March 2011 to June 2018 using a non-parametric conditional density estimation approach. The results indicate that CHI_EPU diminishes stock returns and augments volatility in ASEAN5 markets, except for Malaysia, where it affects stock returns positively. The possible reason for this positive impact is that EPU is not the leading factor reducing Malaysian stock returns; but, other forces, such as dependency on other countries' stock markets and global factors, may have a positive impact on stock returns (Bachmann and Bayer, 2013). Thus, the risk of simultaneous investment in Chinese and ASEAN5 stock markets, except Malaysia, is high. Further, the degree of this influence intensifies at extreme high/low intervals (positive/negative tails). The findings of this study have significant implications for investors, policymakers, market agents, and analysts of ASEAN5.

• International Area Studies Review
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• v.16 no.1
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• pp.147-171
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• 2012

Even though many people loosely term a period of high inflation combined with stagnation "stagflation", it has been very difficult for us to find a more detailed and theoretical definition for such a period. In addition, most economic policy makers have faced some uncertainty and difficulty in identifying stagflation periods through analyzing a lot of economic data. This paper deeply researches the literature on specific definitions of stagflation and provides an empirical method by which we can systematically identify real-time stagflation pressure. Under this method, real-time stagflation pressure can be evaluated as a complex index by using both extensive monthly economic data indicating economic conditions or inflation pressure and a logit regression model. As a result of applying this method to the first half of 2008 in Korea when there was much debate as to whether the Korean economy was experiencing a corresponding stagflation or not, this period is not now evaluated as having been a stagflation period. This paper provides some implications. Namely, we need to put more emphasis on stabilizing inflation expectations.