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 26, Issue 4 (December 2015)

Cover Pages
Abstract | PDF (134 kilobytes)

Linkages among Asian Stock Markets using a Vector Error Correction Model, Pages 1–25

Chae-Deug Yi

Abstract | PDF (473 kilobytes)

This paper analyses the degree of financial interdependence among Asia financial markets including Korea, Japan and China as well as ASEAN countries by dealing with the data through 2001~2013. The empirical results such as the cointegration and Vector Error Correction Model show that most countries respond significantly to shocks from other markets. In Asian Markets, China, Hong Kong, Japan, Korea, Singapore and Taiwan had appreciable impacts on other markets and those shocks were transmitted to other markets for 1 or 2 months. Variances Decomposition shows that Most Asian stock markets are appreciably influenced by each other at every six month ahead, especially by China. Korea has appreciable impacts of its own Korean innovations at every six month ahead. By contrast, the impulse responses of China and Japan to the other Asian markets were relatively small.

A univariate sieve density estimation based on a simulated Kolmogorov-Smirnov test, Pages 26–43

Hosin Song

Abstract | PDF (166 kilobytes)

This paper proposes a simulated Kolmogorov-Smirnov (KS)-based sieve density estimation method. It exploits an objective function which is the difference of two empirical distribution functions, one involved with actual observations and the other with simulated observations.
By minimizing the objective function with respect to the sieve parameters, a sieve density/distribution estimator is obtained. The equivalence of the sieve distribution estimator and the true distribution can be tested by the KS test since the KS test statistic is easily obtained from the objective function. The resulting sieve density estimator is shown to be consistent.
Numerical experiments are conducted to verify the performance of the proposed method. Furthermore, the proposed method is applied to estimate the income density in South Korea. Whether the actual observations can be rationalized by the estimated distribution can be tested by the proposed bootstrap test.

News and Business Cycles for Korea, Pages 44–82

Joonyoung Hur

Abstract | PDF (612 kilobytes)

How important is news'' about not-yet-realized economic fundamentals in macroeconomic fluctuations for Korea? To address this question, this paper estimates a small open economy real business cycle model embedded with the anticipated components of exogenous shocks. Three main findings emerge based on an analysis of Korean data ranged from 1960:Q2 to 2014:Q4. First, a substantial fraction of the variability of output, consumption, and investment is accounted for by unanticipated shocks. Anticipated shocks play a critical role in causing fluctuations in government spending and trade balance, but their business cycle implications are weak. Second, the contribution of anticipated shocks to output and consumption fluctuations increases from the late 1980s to the onset of the Asian currency crisis of the late 1990s. Anticipated shocks account for a dominant fraction of investment variability during the recession period associated with the Asian currency crisis, and of trade balance movements in the post-crisis period. Finally, the financial friction mechanism, in which the country's interest rate spread is dependent upon the level of sovereign debt, has substantial implications for the output and investment dynamics in the model.

Unionized Mixed Oligopoly and Privatization with Excess Burden of Taxation, Pages 83–103

Kangsik Choi

Abstract | PDF (238 kilobytes)

By introducing the excess burden of taxation into unionized mixed and privatized oligopolies, we show that (i) regardless of the number of private firm, privatization of public firm is always desirable when the degree of the excess burden of taxation is small and (ii) when the degree of the excess burden of taxation is large, whether privatization or nationalization is desirable depends on the critical value of the excess burden of taxation. In contrast to the existing works on mixed oligopolies, we find that privatization can enhance social welfare regardless of the number of firms under mild conditions. Thus, the excess burden of taxation is relatively low for industrial countries since privatization is considered a powerful instrument for reducing distortionary taxation for policy reasons.