Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society

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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society

Volume 25, Issue 3 (September 2014)

Cover Pages
Abstract | PDF (820 kilobytes)

No abstract is available for this article.

Seminonparametric Methods for Modeling Conditional Volatility of Exchange Rate, Pages 1–29

Hojin Lee

Abstract | PDF (961 kilobytes)

We employ a seminonparametric (SNP) methodology in characterizing the conditional density of the exchange rate changes. The model selection procedure based on the BIC is used by moving upward along an expansion path. We find the semiparametric AR(4)-GARCH(2,2) model for the KRW/USD returns and the semiparametric AR(1)-GARCH(2,2) model for the JPY/USD returns as the BIC preferred SNP models. Simulations from the BIC minimizing SNP models seem to appropriately mimic the actual data. The time dependent heterogeneity of the actual data is recognized by the simulations from the semiparametric AR-GARCH-type models and the nonlinear nonparametric AR-GARCH-type models. We show that it is important to take departures from the Gaussianity of the data into account in specifying conditional heterogeneity of the exchange rate returns process. We also provide evidence on the benefits from using the SNP models in estimating the conditional density function via simulations.

Understanding Currency Crises and Their Contagion, Pages 30–62

Frederick Dongchuhl Oh, Hyunjoon Lim

Abstract | PDF (1179 kilobytes)

This paper discusses theoretical explanations of currency crises and the contagion from them. We provide a basic introduction to the frameworks of three classical currency crisis models and assess each model’s implications. We then introduce a global game approach in these crisis models, which helps to overcome the limits found in them. Based on our global game analysis, we explain contagion between two economies.

Hidden Saving and In-kind Transfers, Pages 63–80

Dongwon Lee, Joon Song

Abstract | PDF (186 kilobytes)

This paper revisits the claim that public provision of in-kind transfer is more efficient than transfers in cash. A simple job search model suggests that moral hazard would become more severe if recipients can save the transfer payment privately (the hidden saving problem), inducing them to make less effort to find jobs (that is, double deviation problem). We show that because the hidden saving problem always exists, economic efficiency requires overprovision of in-kind transfers and undersupply of cash grants. Our finding suggests that saving is not a virtue for government transfers.

Semiparametric ARCH-X Model for Leverage Effect and Long Memory in Stock Return Volatility, Pages 81–100

Shen Zhang, Heejoon Han

Abstract | PDF (158 kilobytes)

This paper investigates a new semiparametric ARCH-X model to account for both leverage effect and long memory property in volatility. It is a partial linear model combining a nonparametric ARCH component and an exogenous covariate that is persistent in memory. This model can allow for a flexible functional form of the asymmetric relationship between stock return and volatility and generate the long memory property in volatility. We adopt a realized volatility measure as the covariate in our model. For the daily FTSE 100 Index return series, the nonparametric component of our model captures the leverage effect and is estimated to be a complex nonlinear function. It is shown that our model outperforms other parametric or nonparametric volatility models both in within-sample and out-of-sample forecasts.


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