Jaebeom Kim

The relative regressivity of seven lottery games

We study the implicit tax incidence of raising state revenue through a monopoly state-run lottery using a new dataset on individual Minnesota lottery game sales by zip code. We use the bootstrap to compute SEs and construct confidence intervals for Suits Indices of seven lottery products. We conclude that the implicit tax on each product is regressive, and find statistically significant differences in regressivity between some products. Minnesotas newly introduced G3 instant scratch product, printed at time and place of purchase, is also the most regressive lottery game.

Reconsidering Real Interest Parity for Traded and Nontraded Goods

The goal of this paper is to examine the hypothesis of real interest rate parity by contrasting real interest rates across traded and nontraded goods under flexible exchange rates. We employ panel unit root tests to investigate the stationarity of real interest rate differentials. In particular, empirical results support the mean-reverting property of real interest rate differentials for interest rates measured in terms of traded goods.

Short run real exchange rate dynamics: a SUR approach

This paper examines the convergence question by contrasting the half-lives of deviations across the producer price index (PPI) and consumer price index (CPI) in a bivariate error correction model. To improve efficiency, the models are estimated jointly using a seemingly unrelated regressions approach.

Stock returns and aggregate mutual fund flows: a system approach

To investigate if the mutual fund flows have been a driving factor in the US stock market at the macro level, we combine information from the stock market with information from bond and money markets in a system method. The empirical evidence from Seemingly Unrelated Regression Error Correction Model (SURECM) and Granger and Sims causality tests in a system indicates that the fund flows are weakly exogenous and stock performance causes fund flows, implying that investors move their money to the securities that yield higher returns to rebalance their investment portfolios in the US market.

Does inflation targeting matter for PPP? An empirical investigation

This article examines whether Inflation Targeting (IT) matters for long-run Purchasing Power Parity (PPP). For this purpose, we formally assess the evidence on PPP for a panel of 19 countries using two price indices and two panel unit root tests with cross-sectional dependence. The empirical results show that IT plays an important role in providing favourable evidence for long-run PPP.

Financial development, economic growth and convergence clubs

ABSTRACT To study the role of financial development in economic growth, we apply an array of convergence tests designed to capture nonlinear transitional dynamics to real outputs per capita. Strong evidence of multiple convergence clubs is observed, implying that the clubs are formed based on the initial level of real output per capita and average growth rate. Our empirical results show that the stage of economic growth of each country plays an important role for the composition of the convergence clubs. Furthermore, financial development emerges to be a significant determinant, albeit plays differently in the economic growth of each convergence club.

Uncertainty shocks and asymmetric dynamics in Korea: a non-linear approach

ABSTRACT This study investigates the impact of uncertainty shocks on macroeconomic activity in Korea. For this purpose, a Smooth Transition VAR model is employed to document the state-dependent dynamics of two distinct types of uncertainty shocks, namely, financial market based and news-based. When non-linearity is allowed to play a role in our model, quantitatively very different asymmetric dynamics are observed. Following inflation targeting, the responses tend to be smoother and less pronounced. Our empirical results support the view that the link between uncertainty and macroeconomic activity is clear over both recessions and expansions. Furthermore, the impact of uncertainty shocks is more pronounced when economic activity is depressed especially after shocks originate from the financial market, and not from news-based policy uncertainty in Korea.

The Responsiveness of Casino Revenue to the Casino Tax Rate

This paper examines the tax base elasticity of the regulated casino industry in Illinois to help estimate state‐level revenue impacts of casino tax rate changes. Illinois’ shift to a graduated rate schedule increased the highest marginal tax rate on casino adjusted gross receipts (AGR) from 20 percent to 70 percent before reverting to a 50 percent rate. We construct a state‐level casino tax rate variable, which is a statewide average for each month of the marginal casino tax rate facing each casino. We find that a 1 percent increase in this state‐level casino tax rate decreases overall Illinois casino AGR by around 1.1 percent.

Stock Returns and Mutual Fund Flows in the Korean Financial Market: A System Approach

This paper investigates dynamic and causal relations between stock returns and mutual fund flows in Korea using a system method which utilizes information from the stock, bond, and money markets. For this purpose, we employ DSUR proposed by Mark, Ogaki, and Sul (2005), SURECM, and two causality tests by Granger (1969) and Sims (1972) in a system method to account for cross equation correlations among markets which have a close relationship with one another. Furthermore, we make use of information in the variance-covariance matrix of residual to improve the efficiency of the statistical estimates. The empirical evidence from the system method indicates that fund flows do not respond to eliminate the deviation from long-run equilibrium, and stock prices cause net fund flows in the Korean market, implying that investors move their money to the securities that yield higher returns to rebalance their investment portfolios in the short-run. Thus, our findings do not support the popular notion that considers mutual fund flows as a driving force behind rallies in Korean financial markets.