Contractionary devaluation in a heterogeneous agent model

( Yongkul Won ) 한양대학교 경제연구소 2015 JOURNAL OF ECONOMIC RESEARCH Vol.20 No.3

This paper explores the possibility and the robustness of contractionary devaluation in a dynamic heterogeneous agents model in which workers and capitalists make distinct optimizing decisions. Considering a small open developing economy that produces traded and non-traded goods, we assume that new capital goods are constructed by combining non-traded inputs with imported machines. Paying keen attention to the role of investment in the contractionary effects devaluation may exert, we trace both the impact responses and the transitional dynamics of the key macroeconomic variables of interest following a devaluation. Various simulation results show that, contrary to what is generally believed, even investment in the tradables sector falls on impact following a devaluation in many plausible cases. Investment in the nontradables sector falls as expected, and when taken together, aggregate investment almost always drops on impact. As a consequence of the fall in aggregate investment, real output tends to contract in the short run in most cases, whereas the balance of payments always improves following a devaluation. The results of this heterogeneous agent model are similar to those of the representative agent model, which confirms that the contractionary effects of devaluation, mainly through a slump in investment, are robust. A policy implication can be drawn that stabilization policy usually implemented with a devaluation should be complemented by appropriate investment boosting measures to maintain growth potential.

Devaluation and the Role of Voluntary Unemployment

Yongkul Won 서울대학교 경제연구소 2005 Seoul journal of economics Vol.18 No.3

This paper analyzes the effects of devaluation on investment as well as the other macroeconomic variables of interest in the' small open developing economy producing traded and nontraded goods. In so doing, the paper makes use of a perfect foresight dynamic optimizing model, emphasizing the role of imported capital good and the labor market distortions that are prevalent in most developing countries. A particular attention is paid' to the nontradables sector where labor market is rigid by workers' reservation wage and thus voluntary unemployment is possible. The paper intends to see how much the results differ from those of the standard full employment model. Various simulation results reveal that the introduction of voluntary unemployment in' the nontradables sector significantly changes the consequences of devaluation. The situation following devaluation in typical developing countries is likely to be worse than that of the full employment model. While devaluation improves the balance of payments on impact in all cases considered, both sectoral and aggregate investment fall larger than in the full employment model. Moreover, real output of the economy as well as employment in the nontradables sector falls in all cases considered, and falls larger than in the full employment model. The results show that devaluation may turn out to be quite a harsh experience for developing economies, especially those with labor market rigidity.

Panel Causality Analysis on FDI - Exports - Economic Growth Nexus in First and Second Generation ANIEs

Yongkul Won,Frank S. T. Hsiao 한국경제연구학회 2008 Korea and the World Economy Vol.9 No.2

Using panel data from 1981 to 2005, this paper examines the Granger causality relations among GDP, exports and FDI in the three first generation Asian newly industrializing economies (ANIEs): Korea, Taiwan, Singapore, and in the four second generation ANIEs: Malaysia, Philippines and Thailand, in addition to China. After reviewing the current literature, we construct three-variable panel VAR models for the first generation ANIEs, the second generation ANIEs, and finally, all seven economies as a group. We then use the fixed effects model to estimate the panel VAR equations for Granger causality tests. The panel data causality results reveal that there are bidirectional causality relations among all three variables for the three first generation ANIEs, but only statistically weak bidirectional causality between exports and GDP for the four second generation ANIEs. However, when all seven ANIEs are grouped for panel data analysis, we found FDI has unidirectional effects on GDP directly and also indirectly through exports, exports also cause GDP, and there also exists bidirectional causality between exports and GDP for the group. Economic and policy implications of our analyses are then explored in the conclusions.

금융시장의 이중구조와 경제안정화 정책

원용걸(Yongkul Won) 한국경제발전학회 2003 經濟發展硏究 Vol.9 No.2

본 논문은 저개발국 금융시장의 특징중 하나인 금융시장의 이중구조하에서, 공금융시장만을 대상으로 하는 금융관련 경제안정화정책이 소기의 목적을 달성할 수 있는지를 금융시장에 존재하는 정보의 비대칭성을 감안하여 고찰하였다. 이를 위해 본 논문은 정부에 의해 통제되는 은행과 시장원리에 따라 작용하는 사금융시장으로부터 운영자금을 조달하는 기업을 상정한 후, 경제안정화정책의 일환으로 시행되는 은행신용 축소 및 금융자유화, 특히 공금융 시장이자율 인상의 효과에 대한 부분균형 분석을 시도하였다. 분석 결과 사금융시장에 존재하는 정보의 비대칭성으로 인해 정책의 목적과는 달리 적어도 단기적으로는 오히려 전체 금융 중개규모가 감소할 가능성이 있으며, 이에 따라 투자 및 생산이 위축되고 스태그플레이션을 유발할 가능성이 있음을 보일 수 있었다. 이로부터 본 논문은 금융관련 경제안정화정책의 시행과 함께 사금융시장에서 정보의 비대칭성을 완화시킬 수 있는 정부의 노력, 예를 들면 사금융업자의 양성화, 사금융시장의 공금융화 등의 정책이 장기적인 금융시장의 발전과정에서 필요하다는 정책적 결론도 도출할 수 있었다.(JEL : O1, D8, E4) This paper investigates the effects of financial stabilization policies in a developing economy with dual credit markets. Particular attention is given to the effects of an increase in bank loan rate and a decrease in official credit on the size of financial intermediation in a variant of the Stiglitz-Weiss model. Analytical results reveal that, contrary to traditional view for financial liberalization, those policies may end up with a reduction in the size of financial intermediation in the economy, thus causing investment and production activities to fall at least in the short-run. These results suggest that financial stabilization policies should take into account the peculiarity of financial markets in developing countries before delivered.

Regulation and Service Exports: Theoretical and Empirical Analyses

( Gil Seong Kang ),( Yongkul Won ) 한국경제학회 2016 The Korean Economic Review Vol.32 No.2

This paper constructs a theoretical framework to analyze the impacts of deregulation on service exports using the monopolistic competition model developed by Krugman (1980). The framework entails two core claims. First, the positive effects of deregulation on service exports are more prominent in the differentiated or knowledge-intensive service sectors such as insurance, business, and cultural and recreation sectors than those in the standardized ones such as travel and communication sectors. Secondly, the trade-stimulating impacts of deregulation in exporting country are of larger magnitude than those of deregulation in importing country. We then empirically test and prove these arguments using the Hausman-Taylor estimation method and the World Bank`s STRI dataset. From these results, some policy implications are drawn for service industry development.

Does Korea`s official development assistance (ODA) promote its FDI?

( Gil Seong Kang ),( Yongkul Won ) 한양대학교 경제연구소 2017 JOURNAL OF ECONOMIC RESEARCH Vol.22 No.2

This paper empirically investigates whether Korea`s ODA promotes its FDI to recipient countries, using a dynamic panel analysis over the period from 1995 to 2012. The regression results reveal that to-tal ODA, infrastructure aid, and technical assistance exert positive effects on Korea`s total FDI stock in the recipient countries. At the sectoral level, differences between manufacturing and service sectors are noticeable, implying that the so-called vanguard effect of ODA on FDI depends both on industrial sector and on the type of ODA. The positive effects of ODA on manufacturing FDI are con-firmed only in loan-type ODA. Infrastructure-related aid shows no significant effects on FDI in services, but technical assistance and humanitarian aid are positively associated with service sector FDI. Our empirical findings suggest that Korea`s ODA plays a crucial role in facilitating its private investment flows to recipient coun-tries, and thus it is important to formulate appropriate ODA poli-cies favorable for private capital flows.

유라시아 경제통합과 역내 연결성

강길성 ( Gil Seong Kang ),원용걸 ( Yongkul Won ) 한국국제경제학회 2019 국제경제연구 Vol.25 No.2

한국의 신북방정책, 중국의 일대일로(一帶一路)와 아시아인프라투자은행(AIIB), 러시아 주도의 유라시아경제연합(Eurasian Economic Union) 등 유럽과 아시아를 포괄하는 유라시아지역의 경제통합에 대한 주요국의 관심이 높아지고 구체적인 행보가 빨라지고 있다. 그러나 광활한 면적, 비효율적인 교통인프라, 부진한 역내 무역으로 유라시아지역 국가들이 자연적 교역상대국(natutal trading partners)이 되기에는 어려운 여건이다. 그럼에도 불구하고, 우리는 과거 러시아와 중앙아시아 국가들만의 통합과 달리, 한국과 중국이 적극 참여한다면 유라시아 경제통합의 잠재력이 충분하다는 것을 무역보완성지수(Trade Complementarity Index, TCI)와 현시비교우위(Revealed Comparative Advantage, RCA)지수를 통해 확인할 수 있었다. 또한 부진한 교통인프라가 유라시아 통합에 있어 중요한 장애요이며, 이를 개선하는 것이 역내 무역규모를 확대시킬 뿐만 아니라 세계전체 무역에도 긍정적 효과가 있음을 확대 중력모형을 활용한 무역창출효과(trade creation effect)와 무역전환효과(trade diversion effect)를 통해 확인하였다. 이는 유라시아 경제통합을 위한 국가간 물적 인프라(cross-border infrastructure) 투자와 관련제도 개선 등 연결성(connectivity) 제고 노력의 필요성을 실증적으로 뒷받침해 주는 결과라는데 의미가 있다. This paper explores the reasons why much-touted Eurasian regionalism has so far failed to deliver a concrete result using various trade-related indicators, and then evaluates the steps that stakeholders should take in order to achieve meaningful economic integration in the Eurasian region. Various trade and transportation indices such as trade complementarity index(TCI), revealed comparative advantage(RCA) index, and logistic performance index(LPI) among Eurasian countries show that regional disconnection and the lack of complementary trade structure among the former CIS countries have been critical obstacles to economic integration, and including Korea and China would be a solution for the Eurasian regionalism to be economically fruitful. In addition, panel regression analyses reveal that improving regional connectivity would make the countries in the region natural trading partners by raising net trade creation effect of economic integration. Our findings strongly suggest that scaling up investments for cross-border transportation infrastructure and streamlining related institutions take priority over all other regional policies.