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. "Another Look at Great Moderation: The Changes in the Dynamics of Consumption and Output" with Chang-Jin Kim and Chunji Xuan, Revised on March 13, 2015
This paper investigates new implication of Great Moderation in the context of the changes in the dynamics of consumption and output. Since 1984, the volatility of the U.S. real GDP has reduced significantly and has become known as the Great Moderation. However, even though a great deal of literature have addressed the sources of the Great Moderation, no previous study has focused on the relationship between the Great Moderation and the dynamics of macro variables. This paper finds that the reduction in precautionary savings due to lower income uncertainty has both weakened the negative correlation between permanent income and transitory consumption and lowered the persistence of transitory consumption; these have resulted in faster consumption adjustment to long-run level of income. Furthermore, we find that the lower persistence of transitory output due to the improvement in the information technology industry has contributed to the faster adjustment of output to its new long-run level and this result may be related to faster technology diffusion processes. Our results suggest that the Great Moderation has resulted in a change in the dynamics of consumption and output and future research should investigate the role of the change in the dynamics of consumption and output in explaining the source of the Great Moderation.
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.
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