Chulho Jung

Inflation and real stock prices

A time series measure of expectations is used to demonstrate the existence of an inverse relationship between inflation and real stock prices, even after controlling for output shocks. This provides some evidence against Famas famous conjecture (Fama, E., 1981, Stock returns, real activity, inflation, and money, American Economic Review, Sept, 545 - 565).

The J-curve effect and US agricultural and industrial trade

This paper examines the J-curve hypothesis for US agricultural and manufactured goods, using the Shiller lag model. The results support the J-curve effect for agricultural goods, but not for manufactured goods. These findings explain why many studies in the literature fail to support the J-curve phenomenon. There are two explanations for these findings: (1) the aggregation bias of data that combine both agricultural and manufactured goods and (2) the country under study is often an industrial nation like the US or Japan with a high proportion of manufactured goods in both exports and imports.

The degree of competition in the advertising industry

After a merger wave began among advertising agencies in the late 1960s, the Federal Trade Commission investigated the anticompetitive effects of the mergers and concluded that the industry would remain competitive. In this paper, we employ a method suggested by Bresnahan to investigate the issue of competition in the advertising industry. The method uses industry-level data over the period 1972–87 to consider the determinants of supply and demand for advertising messages and to calculate the degree of market power on the supply side of the market. Statistical results support the hypothesis that the industry was competitive over this period.

Forecasting of foreign exchange rate by normal mixture models

Develops a method of forecasting foreign exchange rate by normal mixture model (NMM). Initially establishes a set of exchange rate models and switches from one model to another probabilistically, depending on supply shocks or government policy changes. By assuming that the population distribution of foreign exchange rate is a mixture of normal distributions, these models can then be estimated simultaneously. Uses the estimated parameters of the model to forecast foreign exchange rate, and then four foreign exchange rate models are used to estimate the NMM. The out-of-sample forecasting results obtained show that we can decrease the mean squared error (MSE) of forecast error dramatically by using the NMM, compared with the MSE of the best forecast of each separate model.

Determinants of Nepalese imports1

Abstract This study estimates an aggregate import-demand function for Nepal. On the basis of statistical testing, the log-linear form of the import-demand function is more appropriate than the linear one. The aggregate import-demand—both in the short run and in the long run—is inelastic with respect to own price and cross-price. However, the import demand is elastic with respect to real income in the short run as well as in the long run.

Structural changes and the US money demand function

Previous literature on the stability of the US money demand function suggests mixed results. In this article, we study the stability of the money demand function from the standpoint of structural changes in the function. We first investigate if a stable money demand function can be found for the US for the period from the first quarter of 1959 to the fourth quarter of 2000. The results show that a stable long-run money demand function does not exist for the sample period under consideration. We then estimate unknown structural break points in the variables of the money demand function using Bai and Perrons (1998) method and test if there is a stable relationship in each sub-sample period of the break points. The results show that a stable relationship exists for each sub-sample period. The estimated income elasticity and interest rate semi-elasticity are relatively smaller than Balls (2001) estimates, but consistent with his argument.

The coase theorem in rent-seeking society

Abstract The Coase literature presumes that agents will passively accept a property rights assignment, and then bargain. We use a game-theoretic approach to show that rational agents may instead attempt to rent-seek over the initial rights distribution. In this additional stage to the Coase bargaining problem, the parties expend resources in an effort to influence the property rights assignments. The characterization of the equilibrium in this expanded model suggests that low transactions costs will encourage rent-seeking behavior.

The length of the effect of aggregate advertising on aggregate consumption

Abstract We investigate the longevity of aggregate advertising effects on aggregate consumption over the period 1947–1988, using updated methods. The effects appear to linger for nine years, raising further questions. Perhaps a return to this near-dormant area of research could be productive.

The Persistence And Japan's Trade Surplus

In this study we use tiem-series data to examine the persistence of Japanese trade balance surplus and the existence of a J-curve effect for the period 1975 (I)-1990(I). We extend the earlier studies by applying the Shiller lag model to the first differences of the variables that are subject to a unite root process. The empirical findings support the J-curve effect for Japan and also illustrate that it take 13 quarters before the full effect of an exchange rate change on the trade balance is realized. The results also suggest that in 1985(I), for example, a once-and for -all real currency appreciation of 36.2 percent would remove the average quarterly real trade balance surplus of 2.5 trillion yen in 13 quartets, ceteris paribys.[F30]

Forecasting UK stock prices

The Vector Autoregressive (VAR) model, the Error Correction Model (ECM), and the Kalman Filter Model (KFM) are used to forecast UK stock prices. The forecasting performance of the three models is compared using out of sample forecasting. The results show that the forecasting performance of the ECM is better than that of the VAR and the KFM, and that the VAR performs a forecasting better than the KFM. It seems that the ECM outperforms the VAR and the KFM, since the ECM allows for dynamic updating via an error correction term.