Release of medium-to-long term outlook on respective agenda based
on the analysis of pending macroeconomic issues


Journal of Economic Policy

KDI Journal of Economic Policy, November 2015

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  • Author Korea Development Institute
  • Date 2015/11/30
  • Series No. KDI Journal of Economic Policy Vol.37, No.4
  • Language English
SUMMARY Time-varying Cointegration Models and Exchange Rate Predictability in Korea / Sookyung Park and Cheolbeom Park

We examine the validity of popular exchange rate models such as the purchasing power parity (PPP) hypothesis and the monetary model for Korean won/US dollar exchange rate. Various specification tests demonstrate that Korean data are more favorable for both models based on time-varying cointegration coefficients as compared to those based on constant cointegration coefficients. When the abilities to predict future exchange rates between those models based on timevarying cointegration coefficients are compared, an in-sample analysis shows that the time-varying PPP (monetary model) has better predictive power over horizons shorter (longer) than one year. Results from an out-of-sample analysis indicate that the time-varying PPP outperforms models based on constant cointegration coefficients when predicting future exchange rate changes in the long run.

Analysis of the Structural Changes in Household Debt Distributions by Householder Age in Korea and in the US / Jiseob Kim

This paper analyzes how and why household debt distribution by the householder age has changed over the past decade both in Korea and the US. Data shows that the proportion of household debt held by younger households has decreased, while that held by older households has increased. Empirical analysis shows that a change in the demographic distribution of householders is the main driving force that has shifted the household debt distribution. Given that demographic aging is an inevitable trend, the proportion of household debt held by older households is also expected to increase. Therefore, the Korean government must preemptively prepare for the household debt problem, especially for debt held by older households, by strengthening macro-prudential policies, preventing asset price deflation, restructuring household debt contract structures, and reforming labor market inflexibility.

Job Creation, Destruction, and Regional Employment Growth: Evidence from Korean Establishment-level Data / Janghee Cho, Hyunbae Chun, Yoonsoo Lee, and Insill Yi

Using the Census on Establishments collected by Statistics Korea, we analyze how the patterns of job creation and destruction differ across counties (si-gun-gu). We measure aggregate employment changes due to establishment startups, expansions, contractions, and shutdowns for each county and quantify the role of such reallocations in explaining variation in employment growth across counties. Overall we find that both rates of net entry and job creation play an important role in explaining differences in net job creation rates across regions. Moreover, counties with high employment growth rates also tend to have high exit and job destruction rates, which suggests that an active process of job reallocation is a key source of regional employment growth.

Real-time Impact Evaluation of a Capacity-Building Health Project in Lao PDR / Kye Woo Lee and Taejong Kim

This study presents a real-time impact evaluation of a human capacitybuilding health project in Laos, financed by a Korean aid agency and executed jointly by Laotian and Korean higher educational agencies. The project aims to improve the health status of Laotians by enhancing practicing doctors’ clinical performance capacity, to be attained by advancing academic achievement at the University of Health Sciences (UHS) in Laos. Therefore, this real-time impact evaluation adopted the difference-in-differences regression analysis method, showing that the project improved the academic achievement of the UHS students who were taught by the project fellowship awardees more, compared to the UHS students who were taught by non-fellowship faculty members. It remains to be evaluated whether these UHS students taught by the project fellowship recipients would also perform better clinically in public hospitals in the future.
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