Areas of Research Interests
Financial Economics, International Finance, Commodity Prices
Time Series Econometrics, Forecasting and Simulations
Macroeconomics, Economic Growth and Development, Income Inequality
Mathematical and Quantitative Methods
In the first two papers I studied time series properties of national stock prices and world commodity prices using newly developed econometric techniques including nonlinear panel unit root tests. I believe my empirical findings provide useful implications for international asset market participants and policy makers. My third paper adds important technical contributions to the existing multivariate time series model literature.
Journal Publications:
1) London Calling: Nonlinear Mean Reversion across National Stock Markets (with Hyeongwoo Kim; forthcoming in North American Journal of Economics and Finance)
This paper revisits empirical evidence of mean reversion of relative stock prices in international stock
markets. We implement a strand of univariate and panel unit root tests for linear and nonlinear models
of 18 national stock indices during the period 1969 to 2016. Our major findings are as follows. First, we
find little evidence of linear mean reversion irrespective of the choice of a reference country. Employing
panel tests yields the same conclusion once the cross-section dependence is controlled. Second, we find
strong evidence of nonlinear mean reversion when the UK serves as a reference country, calling attention
to the stock index in the UK. Choosing the US as a reference yields very weak evidence of nonlinear stationarity.
Third, via extensive Monte Carlo simulations, we demonstrate a potential pitfall in using panel unit root tests
with cross-section dependence when a stationary common factor dominates nonstationary idiosyncratic
components in small samples.
Working papers:
1) Price Adjustment to the Exchange Rate Shock in World Commodity Markets (with Hyeongwoo Kim)
We We study dynamic responses of 49 world commodity prices to the exchange rate shock using recursively
identified vector autoregressive models. Our major empirical findings are as follows. First, the price adjustments
toward the new equilibrium tend to be gradual, even though these world commodities are highly tradable. Most
commodities exhibit high degree of price stickiness in the short-run when exchange rate shocks occur. It takes
approximately 8 months for the prices to stabilize to the long-run equilibrium with the exception of oil prices
which respond rather instantaneously. Second, our dynamic elasticity analysis implies that commodity price
responses are heterogeneous. Some commodity prices over-correct for the exchange rate shock, which implies
higher volatility of those prices than the exchange rate. Third, for those commodities that over-react, the
domestic prices tend to rise significantly when the US dollar depreciates unexpectedly, which calls for price
stabilization policies. Some commodities such as oil tend to adjust prices for the effects of the exchange rate
shock so that the local price remains the same.
2) On the Robustness of the Impulse-Response Function of Recursively Identified VAR Models
(with Hyeongwoo Kim and Michael Stern)
As pointed out by Lütkepohl (1991), the impulse response function from recursively identified vector
autoregressive models is not, in general, invariant to the ordering of the variables in the VAR. This paper
reports potentially useful facts that show under what circumstances these impulse response functions are
robust to this thus called Wold ordering. We demonstrate that all response functions to innovations in a group
of the variables with known orderings are invariant to the order of remaining variables in the system among
all possible alternative orderings as long as the former group is ordered first. We demonstrate that this fact applies
to all recursively identified VAR models either by the short-run or by the long-run restrictions. Same principle
applies to the vector error correction models as well.
3) On Japanese Stock Market
Full papers available upon request.