Inhwan So
Assistant Professor,
School of Economics, Hongik University
Email: inhwanso [at] hongik [dot] ac [dot] kr
Fields
Open Economy Macroeconomics, International Finance, Monetary Policy, Uncertainty, Asset Pricing, Banking, Applied Econometrics
Embedded Files
Publications
Monetary and Central Bank Information Shocks: Tales from Alternative Identifications (with B. Jang), Macroeconomic Dynamics, 30, e36, pp.1-33, 2026 [Final WP version] [slides] (substantially revised from [BOK WP (No.2025-7) version])
Heterogeneous Regional Effects of Monetary Policy: Evidence from Korea (with H. Joo and S. Park), Journal of Asian Economics, 94, 101779, 2024 [Final WP version] (substantially revised from [BOK Golden Book (June. 2023) version (in Korean)])
The Economic Effects of Global Inflation Uncertainty (with J. Ha), International Journal of Central Banking, 20:2, pp.69-150, 2024 [Final WP version] [slides]
Stock Returns and Monetary Policy Stance (with B. Jang), International Review of Economics and Finance, Vol. 92, pp.851-869, 2024 [Final WP version] [slides]
Which Monetary Shocks Matter in Small Open Economies? Evidence from Canada (with J. Ha), International Journal of Central Banking, 19:2, pp.389-472, 2023 [Final WP version] [slides] (substantially revised from [BOK WP (No.2017-2) version])
Global Confidence, Uncertainty, and Business Cycles (with J. Ha), International Journal of Central Banking, 19:1, pp.451-495, 2023 [Final WP version & Online Appendix] [slides] [AEA poster]
US Structural Drivers of International Portfolio Returns (with B. Jang and E. Tong), The North American Journal of Economics and Finance, 64, 101872, 2023 [Final WP version] [slides]
The Impact of Uncertainty Shocks: Evidence from Geopolitical Swings in Korean Peninsula (with J. Ha and S. Lee), Oxford Bulletin of Economics and Statistics, 84:1, pp.21-56, 2022 [Final WP version] [Online Supplementary Materials] [slides] (substantially revised from [BOK WP (No.2018-26) version])
Influence of the Banks' Money Mediation Behavior on the Monetary Policy: A Study of Korean Case (with J. Ha), Global Economic Review, 42:4, pp.396-424, 2013
(In Korean)
The Impacts of News and Sentiment Shocks on Portfolio Flows in Korea, Financial Stability Studies (금융안정연구), accepted [Final WP version]
The Impact of Monetary Policy Shocks on Income and Consumption Inequality in Korea (with K. Kim), The Korean Journal of Economics (한국경제학보), forthcoming
News and Sentiment Shocks in Housing Markets, The Korean Economic Forum (한국경제포럼), 19:1, pp.39-64, 2026
Identification and Effects of Monetary Policy Shocks in Korea: Asymmetric Impacts across Business Cycle Phases (with K. Kim), The Korean Journal of Economic Studies (경제학연구), 74:1, pp.67-103, 2026 [RR MP shocks]
Decomposing GDP into Trend and Cyclical Components Using Time Series Approaches: Evidence from Hamilton and Beveridge-Nelson Filters, Journal of Budget and Policy (예산정책연구), 15:1, pp.103-132, 2026
Constructing the Nowcasting Model for Regional Economic Conditions: the Case of Busan (with K. Kim and S. Moon), The Korean Journal of Economic Studies (경제학연구), 72:2, pp.123-163, 2024 [BOK Golden Book (Sep. 2023) version]
Uncovering Regional Economic Fluctuations by Factors and Their Impacts on the Regional Confidence Cycle: Evidence from Busan (with C. Lim and S. Moon), The Korean Journal of Economic Studies (경제학연구), 71:3, pp.5-35, 2023 [BOK Golden Book (Dec. 2022) version]
Impacts of US Monetary Policy on Domestic Bond and FX Swap Markets (with Y. Kwon and M. Kim), Economic Analysis (경제분석), 27:1, pp.1-36, 2021 [Monthly Bulletin (Jan. 2020) version]
Capital Flow and Monetary Policy Effectiveness in Korea, Review of International Money and Finance (국제금융연구), 10:2, pp.39-75, 2020 [English translated version]
Analysis on the Impact of Foreign Position to Foreign Exchange and Stock Market Volatility (with S. Park), Review of International Money and Finance (국제금융연구), 10:2, pp.5-38, 2020 [English translated version] [Monthly Bulletin (Feb. 2019) version]
Analysis of the Relationship between Negative Interest Rate and Bank Profitability (with J. Han), Economic Analysis (경제분석), 24:2, pp.55-88, 2018
(Other professional publications)
Local Currency Bond Returns in Emerging Market Economies and the Role of Foreign Investors (with G. Valante and J. Wu), BIS Papers, No. 102, pp.83-91, Apr. 2019 [HKIMR WP (No.10/2019) version]
Effects of the National Pension Fund and Ageing on Private Consumption and Savings (written in Korean) (with H. Kang), Bank of Korea Monthly Bulletin, pp.23-61, Dec. 2005 [Summary in English]
Working Papers
Demographic Changes and Real Exchange Rates: Future of an Aging Economy (with S. Choi and C. Kim), R&R requested from Journal of Money, Credit and Banking [Yonsei University WP (No.2026-285) version] [slides]
We examine the role of demographic change in long-run real exchange rate (RER) determination. Demographic shifts affect saving and investment behavior, labor supply, and the relative demand for tradable and non-tradable goods, and may therefore influence RERs beyond standard macroeconomic fundamentals. We estimate a panel cointegration model for 75 countries over 1970–2024 that augments a standard long-run RER specification with four demographic variables: the old-age dependency ratio, fertility, life expectancy, and net migration. Demographic variables remain informative even after controlling for productivity. We also complement the baseline specification with a full age-distribution approach, which provides an internally consistent representation of demographic change. Combining the estimated long-run relationships with projections from the United Nations World Population Prospects, we construct conditional RER projections through 2050. Economies projected to age more rapidly tend to face long-run real appreciation pressure.
Investment Giants in Emerging Markets (with D. Kim and J. Park) [Manuscript] [slides] [BOK WP (No.2025-9) version]
A small group of large institutional investors (investment giants) takes the lion's share of cross-border equity flows into emerging markets. This paper examines their behavior and market impact through a theoretical framework in which investors consider both market fundamentals and aggregate behavior. In equilibrium, a single investment giant moves first, setting market direction and providing information to a continuum of typical investors. Compared to a simultaneous-move strategy, this directional leadership increases the giant's ex-ante payoff while establishing the predictability and outsized influence of its decisions. Empirically, we introduce contrarian investment (excess investment growth relative to peers or the market) to isolate the giants' idiosyncratic influence from the shared macroeconomic fundamentals. Using fund-level data, we find that investor flows, aggregate flows, stock returns, and exchange rates persistently increase following giants' contrarian flows, demonstrating their predictive power. These findings suggest monitoring giants as early indicators of financial market movements in emerging economies.
Confidence Shocks in Open Economies: A Global-Domestic Perspective on News and Sentiment (with J. Ha, M. Kim and A. Kose) [draft available upon request] [slides]
This paper investigates how confidence shocks—defined as a combination of news and sentiment shocks, originating from global or domestic sources—affect macroeconomic dynamics in open economies. Using factor-augmented vector autoregressive (FAVAR) models for 18 economies, we identify global and domestic news and sentiment shocks through recursive and medium-run restrictions. We then simulate a two-country DSGE model to explore the transmission channels of these shocks. Three key results emerge. First, positive news shocks—whether global or domestic—raise GDP and lower prices, consistent with a supply-driven interpretation; positive sentiment shocks increase both GDP and prices, reflecting demand-side effects. Second, global confidence shocks have a larger impact on domestic GDP and prices than domestic shocks. Third, news shocks exert more persistent and quantitatively larger effects on macroeconomic aggregates, while sentiment shocks also account for sizeable role. These findings underscore the importance of understanding global confidence cycles in shaping business cycle fluctuations in open economies.
International Transmission of Confidence Shocks (with J. Ha and M. Kim) [draft available upon request] [slides]
This paper examines how global confidence cycles—captured from cross-country business and consumer confidence indicators—affect macroeconomic and financial conditions across countries. Using monthly data for 39 advanced and emerging economies over 1985–2025, we estimate a two-block factor-augmented VAR (FAVAR) model to identify global and domestic confidence shocks through recursive and external-instrument restrictions. We document the presence of a sizable global confidence factor, and show that global confidence shocks account for roughly one-quarter of the variation in domestic industrial production and unemployment, on average. Global shocks propagate more powerfully than domestic confidence shocks and exert stronger effects in advanced economies than in emerging market and developing economies. Importantly, we find that business and consumer confidence shocks differ in nature and transmission: global business confidence shocks generate demand-driven, inflationary expansions, whereas global consumer confidence shocks often produce supply- or news-driven expansions with muted or short-run disinflationary effects. Finally, these results are robust across alternative identification strategies, including joint confidence specifications, alternative recursive orderings and external-instrument approaches, and to an extended sample period.
Local Factors and Return Chasing: A New Phase in Emerging Equity Markets (with J. Ha and D. Kim) [draft available upon request] [slides]
Using granular investor-level data, this paper documents a structural shift in the drivers of global equity flows to Emerging Market Economies (EMEs) over the past two decades. We decompose the variation in flows into global (push) and country-specific (pull) components using a dynamic factor model. While global factors historically dominated, we show that local pull factors have become the main determinant of flows in the post-COVID period. Local projections further reveal a marked intensification of investor sensitivity to domestic excess returns-i.e., return chasing-with the strongest responsiveness emerging after the pandemic. We trace this shift to two channels: (i) the movement of global investors toward more concentrated, actively managed strategies (an intensive-margin adjustment), and (ii) the growing macroeconomic resilience of recipient EMEs. Together, these forces have reoriented global capital allocation toward greater responsiveness to local fundamentals, thereby enhancing the effectiveness of domestic policies in influencing cross-border capital flows.
Identifying Monetary Policy Shocks by Matching Theoretical IRFs (with M. Kim and S. Lee) [Manuscript]
We propose a new structural vector autoregression (SVAR) identification scheme--the matching restriction--which exploits the information embedded in the impulse response functions (IRFs) derived from theoretical models. The matching restriction enables the empirical IRFs from SVARs to be close to the theoretical IRFs. In applications to monetary policy SVARs, we show that the matching restriction effectively addresses two well-known anomalies: the price puzzle and the positive output response to monetary tightening. Specifically, in an SVAR in which the price puzzle is present, the matching restriction based on the theoretical IRF of output (without matching price IRFs) eliminates the puzzle. Moreover, in an SVAR in which a contractionary monetary policy shock increases output, the matching restriction based on the theoretical IRF of prices (without matching output IRFs) allows the shock to decrease output. These findings clearly suggest that the matching restriction provides a bridge between structural theories and SVARs.
(Old ideas)
Bank Globalization and Monetary Policy Transmission in Small Open Economies, [Manuscript] [BOK WP (No.2017-33) version]
This paper investigates how the openness of banking sector influences the transmission channels of home and foreign monetary policy shocks in small open economies. For the analysis, I construct a small open economy DSGE model enriched with a banking sector. I consider two forms of bank globalization: international bank capital finance and foreign loan account import. From the analysis, I find that bank globalization leads to a significant attenuation of domestic monetary policy transmission. On the other hand, opening of the banking sector intensifies the impact of foreign interest rate shocks on the local bank activities.
Local Currency Bond Returns, Foreign Investors and Portfolio Flows in Emerging Markets (with G. Valente and J. Wu) [Manuscript] (under revision)
This study, building upon theoretical frameworks incorporating portfolio decisions of institutional investors and fund flows, proposes a conditional asset pricing model to explain the cross-section local currency bond returns in emerging markets. We find that bonds whose returns covary positively (negatively) with the returns on foreign investors’ portfolios exhibit higher (lower) average returns. The price of this type of risk increases with capital outflows, and bonds whose returns are higher on average exhibit a higher exposure when the price of risk is high. These results have important implications for the development of the local currency bond market.
Wedge in Euler Equation, Monetary Policy and Net Foreign Asset Position in Small Open Economies (with D. Kim) [Manuscript] (under revision)
This paper studies the wedge between the interest rate implied by Euler equation and money market rate in five small open economies – Australia, Canada, Finland, Korea, and the U.K. Standard Euler equation predicts strongly positive relationship between the two interest rates. However, data shows significantly large wedge between them, which causes negative correlation. We explore the systemic link between the wedge and two possible influencing factors – monetary policy and net foreign asset position. The empirical results from our analysis deliver the important message that the wedge is closely related to net foreign asset position in open economies, while its relationship to the stance of monetary policy has mixed results.
Selected Work in Progress
Measuring Transatlantic Monetary Policy Shocks (with B. Jang) [draft coming soon]
Draft coming soon
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