Inhwan So
Assistant Professor,
School of Economics, Hongik University
Email: inhwanso [at] hongik [dot] ac [dot] kr
Before joining Hongik University, I served at the Bank of Korea from 2005-2025. Once a central banker, always a central banker!
Fields
Open Economy Macroeconomics, International Finance, Monetary Policy, Uncertainty, Asset Pricing, Banking, Applied Econometrics
Publications
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)
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 [draft available upon request] [slides]
Draft available upon request
Monetary and Central Bank Information Shocks: Tales from Alternative Identifications (with B. Jang), R&R requested from Macroeconomic Dynamics [Manuscript] [slides] [BOK WP (No.2025-7) version]
Jarocinski and Karadi (2020) proposed a straightforward method to deconstruct monetary policy surprises into pure monetary policy shocks and central bank information shocks by exploiting the opposite-signed comovement between stock price surprises and the two shocks. They highlighted that the shocks bring about significantly different effects on the economy. Expanding upon their approach, this paper examines and compares a variety of alternative instruments, including New Keynesian- and Fama-French factor-based, for the decomposition of monetary policy surprises. Our results collectively suggest that Fama-French's High-minus-Low factor is a valuable navigator, almost comparable to stock price surprises.
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]
Draft coming soon
Local Factors in Emerging Equity Markets: A New Phase of Return Chasing (with J. Ha and D. Kim) [draft available upon request]
This paper explores the drivers and patterns of global equity flows into emerging market economies using granular, investor-level data. We first employ a dynamic factor model to decompose the variance of investor-level flows into global and country-specific (recipient-specific) components. We then use panel local projections to analyze flow responses to domestic return factors (stock returns and exchange rates) across distinct macro-financial periods: pre-Global Financial Crisis (GFC), post-GFC, and post-COVID. The results suggest that country-specific factors significantly explain variation in flows alongside global factors. Moreover, we identify notable changes in the sensitivity of flows to domestic (excess) returns over time: from negative (flight-to-safety) before the GFC, it shifted to muted and then persistently positive (return-chasing) in the post-COVID era. We also document significant heterogeneity in these response patterns across different countries and investor groups, suggesting the importance of both local conditions and investor sizes in understanding emerging-market equity allocation.
Bank Globalization and Monetary Policy Transmission in Small Open Economies, R&R requested from International Journal of Central Banking [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.
Selected Work in Progress
International Transmission of Confidence Shocks (with J. Ha and A. Kose) [draft available upon request] [slides]
Draft coming soon
Measuring Transatlantic Monetary Policy Shocks (with B. Jang) [draft coming soon]
Draft coming soon
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.