Dong-Eun Rhee

Information and capital flows revisited: The Internet as a determinant of transactions in financial assets

This paper investigates the determinants of international transactions in financial assets empirically. We extend the gravity model in Portes et al. (2000) by introducing an internet variable. Using cross-country panel data on the portfolio flows between the US and other countries from 1990 to 2008, we found that the Internet turns out to mitigate the information asymmetries and thus increases cross-border portfolio flows between countries.

An assessment of inflation targeting in a quantitative monetary business cycle framework: evidence from four early adopters

This article examines the effectiveness of inflation targeting (IT) to stabilize the real economy in advanced countries where IT was adopted in the early 1990s. To quantitatively assess IT, this article employs the monetary business cycle accounting methodology recently developed by Šustek (2011), which is an extended version of Chari, Kehoe, and McGrattan (2007), to monetary models. Our main finding is that the monetary policy wedge that captures economic fluctuations caused by monetary policy has significantly declined since the implementation of IT in the early 1990s. The results suggest that advanced economies, such as Australia, Canada, Sweden and the United Kingdom, that adopted IT in the early 1990s have been successful in stabilizing business cycle fluctuations.

Inequality and Growth: Nonlinear Evidence from Heterogeneous Panel Data

This paper investigates the nonlinear relationship between income inequality and economic growth using a heterogeneous panel data set of 77 countries. The estimated nonlinear function exhibits relatively smooth regime switching, as regards the income inequality level in the previous period. The point above which the time-varying coefficient estimate on inequality turns from positive to negative is found to be the Gini index of 24.5. The results suggest that while inequality hinders economic growth in most of the countries, it accelerates economic growth only in a country where the level of inequality is very low. Furthermore, the results reveal that the negative effects of income inequality on economic growth become more serious in developing countries whose level of inequality is relatively higher. The supplementary linear regressions with various specifications generally confirm the results obtained from the nonlinear model.

Teacher Gender, Student Gender, and Primary School Achievement: Evidence from Ten Francophone African Countries

Abstract Using an exceptionally rich, standardised education assessment dataset comprising over 1800 primary schools and 31,000 grade six students from 10 francophone Western and Central African countries, this study analyses the relationship between teacher gender, student gender, and student achievement. Findings indicate that, for girls, being taught by a female teacher increases math and reading performance. For boys, however, teacher gender has no effect. Similar, but less strong effects are also found for subject appreciation. Moreover, traditional academic gender stereotypes remain prevalent among both male and female teachers. Our findings suggest that hiring more female teachers in the region can reduce educational gender gaps without hurting boys.

Does income inequality increase marginal propensity to consume

ABSTRACT This article empirically investigates the effects of income inequality on the marginal propensity to consume (MPC), using panel data of 22 OECD countries over the period 1994–2015. We find that MPC increases dramatically as income inequality increases. In subsample analyses, the MPC of a high inequality group is more than twice that of a low inequality group.

Korea's growth‐driven trade policies: Inclusive or exclusive?

We attempted to find whether the Koreas growth-driven trade policies during the period of its industrialisation has contributed to output growth together with income distribution by qualitatively analysing the performance of trade policies interacting with the multilateral trading system over time. In addition, we conducted a regression analysis to investigate the effect of Koreas trade growth on inclusive growth during its industrialisation period covering the period of 1976–2011. We found that the recent reform policies reported in the WTOs Trade policy review for Korea in 2016 have attempted to achieve more balanced distribution of gains from trade but not enough to lead the Korean economy to a well-balanced welfare state. More specifically, we found the positive effects of international trade on inclusive growth driven by strong output growth effect, not by the effect on income distribution. Even though income distribution measured by Gini indices has been worsened after the East Asian financial crisis, we could not find significant evidence that Koreas rapid international trade growth has been responsible for the deteriorating income inequality.

Non-linear adjustments on the excess sensitivity of consumption with liquidity constraints

ABSTRACT This article investigates the role of domestic credit markets in explaining the excess sensitivity of private consumption to disposable income using heterogeneous panel data of 19 OECD countries over the last two decades. We find that the degree of the excess sensitivity has decreased as the liquidity constraints of households have been alleviated: the estimated time-varying coefficients for the marginal propensity to consume vary between 0.16 for the countries with low liquidity constraints and 0.38 for those with high liquidity constraints. We also provide evidence that the excess sensitivity has been more prominent after the global financial crisis in some advanced countries, such as Japan, Spain, and the United States, where sharp deleveraging of households has been ongoing.

Impacts of Large Disasters on the Macroeconomy and Financial Markets

1. Introduction. 2. Case Studies. 3. Direct Effects and International Spillover Effects on the Macroeconomy: Dynamic Panel GMM Analysis. 4. Direct Effects and International Spillover Effects on Financial Markets: Event Study Approach.

Nonlinear Effects of Government Debt on Private Consumption in OECD Countries

This paper investigates nonlinear effects of government debt on private consumption in 16 OECD countries. The estimated consumption function shows smooth regime switching depending on the debt-to-GDP ratio, and the threshold level of regime switching is found to be the ratio of 83.7 percent. The results reveal that a higher level of government debt crowds out private consumption to a greater extent, and that the degree of the crowding out effect has deteriorated since the global financial crisis.

Effects of U.S. Unconventional Monetary Policy and Implications for QE3

On August 20, 2012, the Federal Reserve announced a third round of quantitative easing (QE3), and interest is mounting as to the significance and influence of this policy. This study analyzes the effects of US unconventional monetary policies implemented during the global financial crisis, such as quantitative easing, Operation Twist, and the Federal Reserve’s policy commitment regarding the course of short-term interest rates. Moreover, it discusses the significance and implications for the QE3. Up to now, unconventional US monetary policy actions have improved the condition of US financial markets and lowered long-term Treasury yields, mortgage-backed security (MBS) rates, and corporate bond yields. The effects of the first round of quantitative easing (QE1) were the most influential, while the effects of the second round (QE2) were only about a third as potent as QE1. The effects of Operation Twist were minor compared to QE2. QE1 resulted in lowering yields on 10-year Treasury securities by 128.6 basis points (bp) and MBS yields by 136bp. QE2 caused 10-year Treasury yields to drop by 42.93bp and MBS yields by 37.25bp. The effects of the quantitative easing policy on the stock market and foreign exchange market are not statistically significant. The effects of QE3 are expected to be less than the previous two QE programs. Up to now, QE3 has lowered 10-year Treasury yields by 8bp and MBS yields by 32.3bp. The implementation of the QE policy in major advanced economies may cause so-called excess global liquidity problems. Global liquidity expansion may result in instability in foreign exchange and international commodity markets.