Duhyeong Kim

Welcome! I am an Assistant Professor in the Department of Economics at Kent State University. I received my Ph.D. in economics from the University of Western Ontario. My research interests include monetary economics, macroeconomics, and international finance.

A copy of my CV can be found here. 

Email: dkim33[at]kent.edu | Twitter | Google Scholar

Publications

Journal of International Economics, 2023 (Working paper version)

A two-country general equilibrium model is developed to study the global consequences of quantitative easing and foreign exchange intervention. The model incorporates financial frictions such as limited commitment, differential pledgeability of assets as collateral, and a low supply of collateralizable assets. Due to differential asset pledgeability, financial intermediaries acquire different asset portfolios particular to their home country. Quantitative easing can reduce long-term nominal interest rates, mitigate financial frictions globally, and depreciate the currency of the country that supplies more pledgeable assets. The international effects of foreign exchange intervention depend on the implementing country. If implemented by the country that supplies more pledgeable assets, such intervention can ease financial frictions and enhance welfare globally.


Working Papers

R&R at the Journal of Monetary Economics

How much can central banks reduce nominal interest rates? Can the lower bound be controlled by monetary policy? If so, should central banks reduce it to implement negative interest rates? I construct a model with multiple means of payment where the costs of holding paper currency effectively reduce its rate of return, creating a negative effective lower bound on interest rates. I find that central banks can reduce this lower bound with a non-par exchange rate between currency and bank reserves, but doing so raises currency-holding costs for individuals, leading to welfare losses. Moreover, implementing a negative rate by reducing the lower bound has no benefits because this policy combination lowers both the rate of return on currency and the interest rate on financial assets, leaving relative interest rates unchanged.

This paper investigates the role of foreign banks in interbank markets and its implications for U.S. monetary policy under a floor system. We develop a two-country, two-sector banking model to illustrate the behavior of domestic banks, U.S. branches of foreign banks, and other financial institutions in interbank markets. We find that a central bank's balance sheet expansion can increase foreign banks' reserve holdings and their activity in interbank markets, while reducing welfare for both domestic and foreign consumers. In contrast, introducing a reverse repo facility reduces foreign banks' interbank market participation and improves welfare globally.

We develop a model of fiat money, private money, and insurance to study their interactions and the implications for monetary policy. In the model, financial intermediaries design contracts for individuals facing preference shocks that determine their desired level of consumption. Each individual's preference shock is private information and costly for intermediaries to verify. Financial intermediaries can endogenously issue state-contingent insurance claims. However, asymmetric information and verification costs create an incentive problem, imposing an upper bound on the quantity of insurance claims. In the baseline model, either fiat money or insurance claims are valued, depending on monetary policy. In an extended version of the model, we present cases where fiat money, private money, and insurance coexist. In these cases, fiat money and insurance behave as imperfect substitutes, while fiat money and private money act as complements.