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Abstract | PDF (2832 kilobytes)

This study uses a DSGE model with a financial accelerator mechanism
and involuntary unemployment to analyze the Korean economy. First, the
fully specified model outperforms the New Keynesian model in terms of implied
volatilities. Second, the structural shocks in the financial friction model
have more amplification effects on macroeconomic variables than those in the
New Keynesian model. Third, the “Fisher deflationary effect” is not significant.
Fourth, the contributions of domestic shocks are more pronounced than those of
foreign shocks. Fifth, the financial risk shock has a significant effect on investment.
Sixth, the global financial crisis was driven by aggregate demand shocks,
aggregate supply shocks, and foreign shocks. However, the pandemic crisis was
mostly driven by adverse aggregate supply shocks, while the adverse foreign
shocks’ contributions were short-lived. Seventh, policy shocks played important
roles in dampening the adverse effects of shocks, especially on output and unemployment
rates.

Abstract | PDF (1664 kilobytes)

A popular approach to forecast variance is to use the fitted value
of a simple OLS autoregression of realized variance measures. However, many
financial returns are known to have highly persistent and possibly nonstationary
volatilities. Under the nonstationarity, the asymptotic behaviors of the OLS estimators
are unclear. We consider the autoregressions with spot, integrated, and
realized variance measures when the spot variance process is nonstationary, and
derive the asymptotic properties of the OLS estimators of the autoregressions. In
particular, the asymptotic biases of the OLS estimators for the regressions with
the integrated and realized variances are obtained. We then consider a feasible
instrumental variable (IV) approach to reduce the bias of the OLS estimator,
where the instrument equals the lagged value of the variable of interest, and show
that the feasible IV estimator obtained from the realized variance is asymptotically
equivalent to the infeasible OLS estimator obtained from the regression
with the spot variance. Simulation results corroborate the theoretical findings of
the paper.

Abstract | PDF (180 kilobytes)

Based on experience of Korea’s two recent economic crises in 1997
and 2008, we investigate if lessons learned from past economic crises can help
predict future economic crises. Using the least absolute shrinkage and selection
operator (lasso)-logit model, we find that the symptoms in the pre-1997 crisis
period do not appear before the 2008 crisis. This finding suggests that the 2008
crisis could not be predicted using lessons learned from the precedent crisis.
We also attempted to answer an even more hypothetical question of whether the
first crisis could have been predicted if lessons from the second crisis had already
leaned. Our findings suggest that the 1997 crisis could have been predicted using
lessons learned from the 2008 crisis. Overall, our findings imply that factors that
cause the future crisis encompass those of the past crisis, but it is difficult to
predict a future crisis armed only with experience of a past crisis.

Abstract | PDF (156 kilobytes)

Using a national longitudinal data from South Korea, this study investigates
the effects of single-sex schooling on three non-cognitive outcomes:
depressive symptoms, self-esteem, and school aspirations. Analysis using a
differences-in-differences approach reveals that single-sex school attendance improves
non-cognitive outcomes, especially for girls, but the results are mixed for
boys. These findings are robust across varying definitions of treatment and control
groups utilizing single-gender and mixed-gender classes in coeducational
schools. While coeducational schooling is attracting greater attention in latedeveloped
countries such as South Korea, this study implies that it might have
unintended adverse effects on students’ non-cognitive development.