Professor of Economics
Department of Economics
5-1, Anam-dong, Seongbuk-Gu
Seoul, 136-701, South Korea
Home page: http://econ.korea.ac.kr/~dhkim/
office: +82 2 3290 - 2226
FAX: +82 02 928 - 4948
Current Working Papers
1. "Has the predictability of the yield spread changed?" with Euihwan Park, Revised on September 18, 2017
This paper examines the stability of the predictive power of the yield spread for future GDP growth. We nd that the ability of the spread to predict to future GDP growth has weakened since 1984 (the beginning of the Great Moderation). As the existing literature has pointed out that the predictability of the spread could be decomposed into the expectation component and the term premium component, we investigate the change in the predictability of both components and nd that that the term premium component appears to have lost the predictive power signicantly while the predictive power of the expectation component has remained. In order to examine the change in the cyclical movement of the term premium, we take a look at the Expectations Hypothesis and nd that since the 1984, the Expectations Hypothesis appears to be rejected less than before, implying that the time-varying movement of the term premium seems to have been weaker than before.
2. "New Dynamics of Consumption and Output" with Chang-Jin Kim and Chunji Xuan, Revised on January 12, 2018
Since the mid-1980's, the volatility of major macro variables has decreased significantly, known as the Great Moderation. Even thought a great deal of literature addressed the sourves of the Great Moderation, its effects or changes in dynamics of macro variables have not been investigated rigorously. We report two empirical findings in this paper: i) a faster adjustment of consumption to new permanent income (as approximated by the random walk component of real output) in response to the shock to permanent income and ii) a faster adjustment of real output to its long-run random walk component since the mid-1980s. We interpret tht the reduction in the persistence of transitory consumption appears to be responsible for the former and a faster technology diffusion process that results from improved information technology may be responsible for the latter. Our results suggest that with the oneset of the Great Moderation, permanent shocks have become relatively more important than transitory shocks in the U.S. business cycle dynamics and policies that affect transitory consumption have become less effective.
3. "Public investment in transportation and communication and growth: A dynamic panel approach" with M. Emranul Haque, Revised on May 2009.
This paper investigates the relationship between public investment in transportation and communication and economic growth using traditional instrumental estimation and a mixed fixed and random coefficient approach in the context of a dynamic panel framework. We find that there is a dynamic effect of public investment in transportation and communication on economic growth and its impact seems to be positive and to be a long-run effect. However, for the reverse causal relationship proposed by the investment acceleration hypothesis, we find that there is significant heterogeneity across countries and thus the reverse causality does not seem to run. These results suggest that greater heterogeneity in one causal direction than in the other can be instructive point in terms of more traditional analyses.
4."Nonlinearity in the term structure," Revised on December 2008.
This paper investigates the nature of nonlinearities in the term structure using the flexible approach to nonlinear inference. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there is a threshold effect of volatility on the interest rate but this effect does not capture the entire nature of the nonlinearity. The quadratic term structure model recently proposed performs better for capturing the nonlinearity than the threshold model but the former model seems to miss some aspect of nonlinearity for short-term rates. However, our flexible nonlinear model which incorporates the threshold effect and the convexity of volatility into the quadratic model, generally performs well for all interest rates. The paper suggests that this model is a promising representation of nonlinearities and out-of-sample forecasts support the claim of nonlinearities.
"Flexible Nonlinear Inference with Endogenous Explanatory Variables", Seoul Journal of Economics 28.3, Fall 2015, 311-323.
"The evolution of the monetary policy regimes in the U.S." Co-authored with Jinho Bae and Chang-Jin Kim, Empirical Economics 43, September 2012, 617 - 649
"What is an oil shock? Panel data evidence" Empirical Economics 43, August 2012, 121 - 143
"Observed Inflation Forecasts and the New Keynesian Phillips Curve", Co-authored with Chengsi Zhang and Denise R. Osborn, Oxford Bulletin of Economics and Statistics 71 No.3, June 2009, 375 - 398..
"The New Keynesian Phillips Curve: from Sticky Inflation to Sticky Price," Co-authored with Chengsi Zhang and Denise R. Osborn, Journal of Money, Credit and Banking 40 (4), June 2008, 667 - 699.
"Another Look at Yield Spreads: The role of liquidity," Southern Economic Journal 74 (4), April 2008, 952 - 970.
"Nonlinearity in the Fed's Monetary Policy Rule" Co-authored with Denise R. Osborn and Marianne Sensier, Journal of Applied Econometrics Vol. 20, September 2005, 621 - 639.
"A Re-examination of the Predictability of Economic Activity Using the Yield Spread" Co-authored with James D. Hamilton, Journal of Money, Credit and Banking 34, May 2002, 340 - 360.
Park, Euihwan, Dong Heon Kim, and Kyun Kim, 2017, "The Study on the Development of the Financial Sector Early Warning System," Journal of Economic Theory and Econometrics Vol. 28, No.3, (Korean), 36 - 67.
Choi, Kyongwook and Dong Heon Kim, 2015, ¡°The effect of commodity price volatility on G20 economies¡± The International Monetary System, Energy and Sustainable Development, Ed by Sung Jin Kang and Yung Chul Park, Routledge Taylor & Francis group, London and New York.
An, Sungyoung and Dong Heon Kim, 2014, ¡°Does the Aging Labor Force Reduce Labor Productivity?¡± The Journal of Korea Economic Studies (Korean Journal), Vol. 32, No.4, 157-181.
Kim, Dong Heon and Manjong Lee, 2014, ¡°A Study on the Framework of Macroprudential Policy Instruments and It¡¯s Application Method¡± The Analysis of the Korea Economy (Korean Journal), Vol. 20, No.3, 111-162.
Bae, Byung Yoon and Dong Heon Kim, 2013, ¡°The Study on the Effect of the Change in USA Financial Conditions on the Korea Financial Markets: FCI Analysis¡± Financial Stability Studies (Korean Journal), Vol. 14, No.1, 75 – 108.
"Demographic Structure and Financial Markets in Korea" Co-authored with Cheolbeom Park, Korea and the World Economy 13(2), August 2012, 307 - 328.
"Global and Regional Yield Curve Dynamics and Interactions: The Case of Some Asian Countries" Co-authored with Byung Yoon Bae, International Economic Journal 25 (4), December 2011, 717-738.
"The Role of Money in the Dynamic IS model" Co-authored with Yoon Sang Lim, Journal of Economic Theory and Econometrics (Korean Journal) 22, No.3, September 2011, 86 - 103.
"The Role of Money in the Monetary Policy Rule" Journal of Economic Theory and Econometrics (Korean Journal) 21, No.3, September 2010, 91 - 112.
¡°The Analysis of daily Korea call rate¡± Co-authored with Myoungjae Lee, Economic Analysis (Korean Journal) 14, No.4, December 2008, 85 – 112.
¡°Risk Premium, Liquidity Premium, and Expectations Hypothesis in the Treasury Bill Market¡± Journal of Economic Theory and Econometrics 19, No.2, June 2008, 95-124.
¡°Uncovering Structural Change in U.S. Economy: The Analysis of Single Source of Error Beveridge-Nelson Decomposition¡± Co-authored with Chang-Jin Kim and Dowan Kim, Economic Analysis (Korean Journal) V14, No. 1, March 2008, 64 - 91