Research
Fields of Interest
Financial Economics, International Finance, and Urban Economics
Publications
Financial development and the growth effect of foreign direct investment: Does one size fit all?
with Jaebeom Kim
International Economics, Volume 173, May 2023, Pages 276-283
This paper examines the relationship between financial development and the growth effect of foreign direct investment in a panel of 75 countries between 1990 and 2019 using a regression-based club convergence test and linear and nonlinear specifications. Our regression analysis suggests that financial development emerges as a significant determinant of the composition of convergence clubs, albeit differently for the nexus between foreign direct investment and growth in each club. The results also point to the presence of heterogeneity and threshold effect in the relationship between foreign direct investment and growth, reflecting both the “kick-in” and “vanishing” effects of financial development. Thus, at lower levels of financial development, pursuing policies aimed at improving local financial sector conditions in tandem with policies aimed at attracting more foreign direct investment can help host economies maximize the benefits of foreign direct investment. However, policymakers can expect these benefits to eventually decline as the economy becomes more financially developed.
Foreign Direct Investment and Economic Growth: Is More Financial Development Better?
with Jaebeom Kim
Economic Modelling , December 2020, Volume 93, Pages 154-161
We investigate the extent to which an increase in financial development affects the positive effect of foreign direct investment on economic growth. Although the financial sector is beneficial for economic growth, the effect of further financial development on growth is found to become insignificant. Using a dynamic panel threshold model on 62 middle- and high-income countries spanning the period 1987-2016, we re-examine the possible nonlinearity between finance, foreign direct investment, and growth. Consistent with the "vanishing effect" of financial development, we find significant evidence that foreign direct investment fosters growth in general, but the growth effect of foreign direct investment becomes negligible when private sector credit to gross domestic product exceeds 95.6%. This finding is robust to different econometric methods, various subsamples and interaction analyses, and distinct financial development indicators.
Seasonality and Stochastic Volatility in Wheat Options
Journal of Economic Insight (formerly the Journal of Economics (MVEA)), 2015, Volume 41, Issue 1, Pages 1-20
While significant progress has been made in volatility and seasonality in modeling agricultural commodity options, little attention has been given to seasonal stochastic volatility models that incorporate the Samuelson Hypothesis. This paper examines the effects of seasonality and stochastic volatility on the pricing performance in the Chicago and Kansas City wheat options markets. We model a seasonal stochastic volatility model consistent with the Samuelson Hypothesis. The model parameters are estimated using data comprised of daily prices of wheat futures and American-style options written on these futures contracts. The seasonal stochastic volatility (SSV) and the stochastic volatility (SV) models are compared with the benchmark Black’s (1976) model to examine the effects of seasonality and stochastic volatility on the pricing performance of the wheat options. The results show that incorporating seasonality, the Samuelson’s Hypothesis, and stochastic volatility significantly improves the pricing accuracy of wheat options in the two major wheat markets.
Which Immigrant and Minority Homeownership Rates Are Gaining Ground in the US?
with Durba Chakrabarty, John V. Winters, and Danyang Zhao
Journal of Economics and Finance, April 2019, Volume 43, Issue 2, Pages 273–297
This paper investigates post-2000 trends in homeownership rates in the US by immigrant status, race, and ethnicity. Homeownership rates for most groups examined rose during the housing boom of the early and mid-2000s but fell during and after the housing bust. By 2015 homeownership rates had fallen below year 2000 levels for most groups but not all. In particular, some Asian immigrant groups experienced sizable gains in overall homeownership rates and in regression-adjusted differences relative to white non-Hispanic natives. Some other immigrant and minority groups also made gains relative to white non-Hispanic natives. We document and discuss these changes. [IZA Discussion Papers No. 10852]
Labor Demand Shocks and Housing Prices across the US: Does One Size Fit All?
with John V. Winters
Economic Development Quarterly, 2019, Volume 33, Issue 3, Pages 212-219
This paper examines whether effects of labor demand shocks on housing prices vary across time and space. Using data on 321 US metropolitan statistical areas, we estimate the medium and long-run effects of increases in MSA-level employment and total labor income on housing prices. Instrumental variable estimates for different time periods, and also for coastal, non-coastal, large, and small MSAs are obtained using the shift-share instrument. Results suggest that labor demand shocks have positive effects on housing prices. However, these effects appear to vary across time periods and across different types of MSAs. [IZA Discussion Paper No. 11636]
Heterogeneity in the Local Employment Multipliers in the United States
with Shruti Sengupta
Growth and Change, 2019, Volume , Issue , Pages 1-14
Recent studies have found evidence of a local employment multiplier effect. For the most part, these studies provide an average estimate for all labor markets. In this paper, we examine how the average local employment multiplier, the effect of an exogenous increase in employment in the tradable sector on total employment, depends on the characteristics of the local labor market. Specifically, we estimate the average multipliers for coastal, noncoastal, large, and small metropolitan statistical areas across different time periods using data on 333 US metropolitan statistical areas. Overall, we find a reduced-form local employment multiplier ranging from 1.38 to 2.24, which is within the range of typically estimated local employment multipliers. In addition, the characteristics of the local labor market matter. The local multipliers appear larger in noncoastal and large metropolitan statistical areas. For small and coastal metros, the multiplier is closer to 1.5 than to 2.0 while in the case of large and noncoastal metros, it is closer to 2.0 than 1.5. The local multipliers are also sensitive to the time period considered.
Working Papers
A Threshold Analysis of the Effect of House Prices on Local Labor Markets in the US
with Josephine S. Akosa
This paper examines whether the local employment multiplier, the effect on total employment of an exogenous change in tradable sector employment, differs in systematic ways depending on the average house price using a threshold regression model. Using data on 321 US metropolitan statistical areas, the results point to the presence of threshold effect. The local employment multiplier increases with the average house price until some house price threshold level beyond which it decreases, suggesting that affordable local housing markets not only help attract companies, but it also allows local economies to maximize the benefits from location-based economic development policies aimed at creating local jobs.
Does Higher Educational Attainment Matter for Achieving the American Dream of Homeownership?
with Joshua Sebu
We examine recent trends and correlates in the homeownership gap between college and non-college graduates in the US within and across different racial and ethnic groups. We find that the homeownership gap widened across all groups between 2000 and 2017 and the gap was smaller among white male natives but larger among black female natives. In addition, among those with a college degree, while most Asian groups experienced substantial gains in homeownership relative to white natives over the sample period, that for most Hispanic and black groups deteriorated during the same period. Our results suggest that the relative importance of higher educational attainment in homeownership in the US is much more subtle; it depends on race, ethnicity, nativity, and gender. Higher educational attainment matters for homeownership but it is wholly inadequate to bridge the racial/ethnic gap in homeownership.