Research
Job Market Paper
"A Model of Bank Asset and Liability Management with Loan Commitments"
Abstract: This paper develops a simple model of bank asset and liability management with loan commitments, in which a bank faces a liquidity management problem due to stochastic loan commitment take-down. Consistent with the model's implications, our empirical research finds: (1) the use of loan commitments increased after interstate banking deregulation, which suggests that a bank's ability of tapping uninsured funds through cheaper external financing or internal capital markets is critical to its decision on the amount of loan commitments to be issued, (2) the ratio of C&I (Commercial and Industrial) loans to total loans increases with the amount of C&I loan commitments (as a share to total loans) during contractionary periods and this tendency is more pronounced for banks with more limited access to external financing. Following the model's implication, it suggests that banks tend to reduce the amount of its term loans to be issued in an attempt to deal with tighter financial constraints, caused by increased loan take-down. That is, loan commitments crowd out term loans during periods of financial distress, indicating the disproportionate impact on the borrowers of loan commitments and term loans, and (3) as a natural extension of the previous implication, the states with more intensive use of loan commitments suffer less from external shocks, displaying smaller economic fluctuations during contractionary periods. Neither state-specific industry structures nor other bank balance sheet variables can explain away this finding. Implications for the increased macroeconomic stability of U.S. economy from mid 80's, bank lending channel and risk-based capital regulations are discussed.
Macroeconomics, Money & Banking, Financial Economics
"Does Monetary Policy Help Least Those Who Need It the Most?" with Michael S. Hanson (Wesleyan College) and Erik Hurst (University of Chicago GSB, NBER). Presented at Capital Markets and the Economy Workshop, NBER Summer Institute, 2004.
Abstract: We estimate the effects of U.S. monetary policy on the cross-sectional distribution of state economic activity variables for a 35-year panel. Our results indicate that the effects of monetary policy have a significant history dependence, in that depressed regions contract more quickly to contractionary monetary shocks. Moreover, policy is asymmetric, in that expansionary shocks have less of a beneficial impact upon depressed areas. We interpret our results as indicating the importance of a credit channel in the transmission of monetary policy. Implications for EMU are discussed.
"A Study on the Transmission Mechanism of Monetary Policy in Korea: An Empirical Evidence on the Lending Behavior of Banks," MA paper, Yonsei University, 1998.
Applied Econometrics/Econometrics
"Modal Choice in Product Shipments: Analysis of Non-Public Census Micro Data," with Gale Boyd, Marianne Mintz and Anant Vyas (Argonne National Laboratory), Presented at TRB (Transportation Research Board) Commodity Flow Survery Conference, Boston, 2005.
Abstract: Modal choice of product shipments has changed in the last 20-25 years, which has implications for the shipping sector, transportation patterns, energy use, and pollution. However, the aggregate data is insufficient to isolate the combined effects of the shipper-specific, i.e. the establishment the shipment originated from, and shipment-specific, i.e. the shipment characteristics in terms of size, distance, and value of the item shipped, on mode choice. We use novel data by linking the raw, non-public shipments data from CFS (Commodity Flow Survey) to the corresponding establishments data from CM (Census of Manufacturing). Multinomial logit analysis reveals that the value-to-weight relationship can explain a lot of observed product-specific differences, which were regarded as industry-specific effects in the aggregate data.
"Comparison of ARCH Model Estimators in the Presence of Heteroskedasticity of Unknown Forms: OLS, MLE and Semiparametric Approach," Econometrics Workshop, Yonsei University, 1997.
Other personal interest: social mobility, education, public policy
"Genes and Social Mobility: A Case for Progressive Income Tax," mimeo, 2003.
Abstract: The effect of genetic inheritance on income distribution and social mobility is analyzed using the model of Becker and Tomes (1979) and the simplified version of Benabou (2001). Epstein-Zin style utility function is used to highlight the role of risk aversion. The result shows that higher genetic inheritability leads to lower per capita income, higher income variance and lower aggregate welfare at the steady state. This tendency is intensified when the elasticity of child's income to parent's educational investment is higher. In this setup, it is shown that progressive income tax can be a welfare-enhancing tool by increasing social mobility. The optimal progressive income tax rate is obtained in the benchmark model and its positive effect is discussed in the context of 'veil of ignorance,' a concept proposed by Rawls (1971).
"Meritocracy and Income Distribution: Does the Inheritance of Ability Matter to Income Inequality?" 2nd year paper (Advisor: Prof. Casey Mulligan), 2001.