Bokyeong Park

Can Capital Account Liberalization Lessen Capital Volatility in a Country with “Original Sin”?

The term “original sin” refers to countries that cannot take out foreign loans that are denominated in its own currency. This study investigates how capital account liberalization affects capital flow volatility in countries with and without original sin. Overall, we find that the level of capital openness increases capital flow volatility, and that countries with original sin experience additional volatility in their capital flows. When the data sample is limited to countries with high institutional quality, the difference remains between the two groups—confirming that the different effects of capital openness on volatility should be attributed to differences in the international status of currencies rather than in institutional quality. Emerging economies whose currencies are not internationalized should therefore be more cautious of capital account liberalization.

In Search of a New U.S. Economic Path in the Aftermath of the Global Financial Crisis

The global financial crisis that began in 2008 was, outwardly, a result of the bankruptcy of American financial institutions. The crisis, however, has alerted us to the deeper crisis underlying not only the American financial market, but also the American economy as a whole. Multiple scholars have pointed out that the recent financial crisis stems not only from the financial sector, but also from the larger structural factors. In light of this claim, this report seeks to reevaluate whether and how the U.S. federal economic policy has been addressing and remedying the structural factors that have led to the current financial crisis. Our research shows that, while the post-financial crisis federal policy on the economy does evince features that are divergent from those of the past policy, it is yet too early to conclude that a new policy paradigm or a fundamental shift has taken place.

Determinants of Domestic Public Debt Crisis

This paper analyzes the determinants of domestic public debt crisis. There have been many studies that examine the causes and consequences of external debt crisis. However, little attention has been put to domestic debt crisis and the importance of it has been neglected. This is mainly due to two facts: First, the number of occurrence of the domestic debt crisis is less than that of external debt crisis, and second, the consistent database has not been constructed. Recently, many attempts have been made to construct database for domestic debts and domestic debt crises. This paper uses the database established by Panizza (2008), and tries to analyze the determinants of domestic debt crisis. We apply the panel probit model to determine the factors that cause domestic debt crisis and to find the debt thresholds of individual countries. The results of the paper show that many macro variables are important determinants of domestic debt crisis. Also, unless important macro variables are controlled, domestic debt ratio variable did not have significantly positive coefficient. This implies that the status of the macro variables determines the tolerable levels of domestic debt ratio, and that the countries have quite different levels of domestic debt ratio thresholds depending on their macroeconomic fundamentals. Thus, unless these factors are controlled, the comparison of domestic debt ratios between countries is meaningless.