Identifying the Erratic Phase in the Behavior of the US Housing Prices

Jangryoul Kim(김장열),Gieyoung Lim(임기영) 한국외국어대학교 영미연구소 2008 영미연구 Vol.19 No.-

In this paper, we have provided empirical evidence on the presence of two distinct regimes for the evolution of the US housing price inflation. We apply a twostate Markov switching model to estimate the regimespecific behavior of the housing price inflation and the probabilities that the US economy is in respective regime. One of the two regimes appears ‘typical’, in that the rate of housing price inflation negatively responds to higher real interest rate and that the effect of a shock to the housing inflation dies out in a reasonable period of time. The other regime, however, is ‘atypical’, in that the housing price inflation is positively related with real interest rate and that any disturbance to the housing price inflation lingers for almost two years. Data features of the atypical regime suggest that such a regime is a mixture of the formation and collapsing of housing price bubbles. It is also shown that, depending on which state the economy is in, the appropriate policy responses of the central bank are qualitatively different.

Should the Federal Reserve Have Responded to Asset Prices?

Jangryoul Kim,Sungjin Cho 서울대학교 경제연구소 2010 Seoul journal of economics Vol.23 No.1

Determining strategies for taking into account movements in asset prices is a perennially important issue for central banks. In this paper, an analysis is provided to address this issue for the U.S. economy. To do so, an empirical model of the U.S. economy is constructed and estimated, and the estimated model is simulated with a set of alternative monetary policy rules. Comparing the stabilization performance of the rules, it is found that: i ) by responding to a larger set of policy indicators and taking a more aggressive stance toward inflation and output gap in particular, the Federal Reserve could have achieved a much higher degree of stabilization; ii) had the Federal Reserve responded to its historical policy indicators differently, it could have conducted a nearoptimal policy rule, even without taking into account movements in housing and stock prices; iii) the Federal Reserve could have likewise achieved close-to-optimal stabilization results by properly responding to movements in asset prices, on top of its historical policy scheme; and iv) stock price inflation contains more useful information that helps further stabilize the economy than does housing price inflation.

House Prices and the Stance of Monetary Policy: The Case of Korea

Jangryoul Kim,임기영 연세대학교 동서문제연구원 2009 Global economic review Vol.38 No.4

This paper is an empirical investigation on whether the Bank of Korea should respond to the housing price developments in conducting monetary policy. For that aim, we construct a small scale empirical model of the Korean economy, simulate the estimated model with a set of alternative monetary policy rules, and compare the stabilization performances of those rules. There turns out to be ample room for further stabilization of inflation and output, if the central bank shifts from the historically conducted monetary policy rule to the optimal rule. The stabilization gains under the optimal rule, however, are not attributable to additional policy indicators (such as housing price inflation) the optimal rule involves. Rather, the optimal rule improves upon the historical one because the former takes a quite different reaction scheme toward the historical policy indicators. Moreover, as long as the Bank of Korea maintains appropriate reactions to the historical policy indicators, housing price inflation does not contain much extra information for further stabilization.

The Non-equivalence Revisited: Staggered Price and Wage Contracts

Jangryoul Kim,임기영 연세대학교 동서문제연구원 2007 Global economic review Vol.36 No.3

Staggered wage-setting and price-setting have frequently been used to constructbusiness cycle models that can replicate long-lasting real effects of monetary shocks. We xaminehow the two seemingly equivalent sources of nominal rigidities compare in generating persistencein real output following monetary expansion. We show that staggered wage-setting is in generalconsiderably more than staggered price-setting does.

Tying the Hands of the Central Bank : Welfare Comparison of Alternative Nominal Anchors

Jangryoul Kim,Gieyoung Lim 한국응용경제학회 2004 응용경제 Vol.6 No.3

본 논문은 화폐가 도입된 경기변동모형을 이용, 중앙은행이 세 가지 명목기준지표(가격인플레이션, 명목임금증가율, 통화증가율)를 일정하게 유지할 경우 결과되는 후생수준을 비교한다. 대표적인 가계의 평생효용을 후생의 척도로 이용하며, 모형내 비선형 동학의 후생효과를 고려하기 위해 2차근사해법을 이용하여 모형의 해를 구한다. 고정된 인플레이션 타게팅은 장기 인플레이션율이 높은 경우에만 운용가능하며, 영에 가까운 장기 인플레이션율 하에서는 다른 두 명목지표들을 타게팅하는 것이 운용가능한 인플레이션 타게팅에 비해 더 높은 후생수준을 가져온다. 이는 낮은 장기 인플레이션으로부터 오는 효율성증대 효과가 단기적인 인플레이션 안정화의 후생증대효과보다 크기 때문이다. The performances of three alternative nominal anchors, i.e., price inflation, nominal income growth, and money growth are compared in monetary business cycle model. The representative household's lifetime utility is used as a natural welfare metric, and a quadratic approximate solution method is used to capture the welfare effects of the non-linear dynamics. Strict inflation targeting is a feasible and desirable policy only when the economy has to run high rates of long-run inflation. With the long-run inflation rate close to zero, strict targeting of the other two anchors yields comparably higher welfare level than a feasible inflation targeting, since the efficiency gains from lower long-run inflation outweigh the welfare gains from short-run inflation stabilization.

Solving Dynamic Rational Expectation Models : an Accuracy Comparison

Jangryoul Kim,문기영 한국응용경제학회 2006 응용경제 Vol.8 No.1

이 논문은 동태일반균형모형에 대한 일차 및 이차 근사해법을 비교분석한다. 우리는 이차 근사해가 일차 근사해보다 정확함을 보인다. 또한 일차근사해법의 부정확성에 의해 각 통화정책 규칙하 후생의 순위가 바뀔 수도 있음을 보인다. This paper compares the first and second order approximate solution methods for dynamic general equilibrium models. Applying two solution methods of different approximation orders to a medium scale DSGE model, we show that the second order approximate solution is more accurate than the first order one in the spirit of den Haan and Marcet (1994). Also, the inaccuracy of the first order approximate solution method turns out to be large enough to yield incorrect welfare ranking of alternative monetary policy rules.

미국 달러 가치내의 합리적 거품규모 추정

김장열(Jangryoul Kim),임기영(Gieyoung Lim) 한국외국어대학교 영미연구소 2007 영미연구 Vol.17 No.-

This paper employs the Kalman filter technique to estimate stochastic bubbles for exchange rates between the U.S. dollar and the Euro and the Canadian dollar. We obtain a significant evidence supporting that the U.S. dollar has recently been undervalued below its fundamental values. The results are qualitatively the same when the model is extended to incorporate conditional heteroskedasticity in errors.

영문 : 미국 주택 가격 상승률의 비대칭성과 최적통화정책

김장렬 ( Jangryoul Kim ),( Minyoung Kim ),( Gie Young Lim ) 국제지역학회 2009 국제지역연구 Vol.13 No.2

우리는 경제 내에 불확실성이 있을 경우의 최적 통화정책 준칙을 살펴본다. 특히 총수요에 대한 주택가격의 효과 뿐 만 아니라 주택가격 상승률에 관한 두 가지 가능한 영역을 허용한다. 두 가지 상태에 대한 불확실성이 Markov 상태 변환으로 모형화 된다. 미국 자료에 대한 예비 추정 결과는 두 개의 다른 상태 즉 정상 상태와 주택가격 버블 상태 영역의 존재를 확인한다. 다음으로, 본 연구에서는 주택시장에 두 개의 상태가 존재할 경우 중앙은행의 최적통화준칙을 살펴본다. ‘통상적’ 상태 하에서는 인플레이션 압력에 반대로 대응해야 하는 반면, 버블 상태에서는 인플레이션 압력을 수용해야 한다는 면에서 중앙은행의 최적통화정책은 비대칭적이다. 또한, 미래 상태에 대한 불확실성이 있을 경우 더욱 보수적으로 통화정책을 운용해야 한다는 결과를 도출한다. This paper studies optimal discretionary monetary policy in the presence of uncertainty in the housing sector. In particular, we allow two possible regimes regarding the evolution of housing price inflation and the effects of housing price inflation on the aggregate demand. Estimation results with the US data confirm the presence of two distinctive regimes, one ``normal`` and the other more akin to the housing price ``bubble`` state. The optimal policy is ``asymmetric`` in that the optimal responses in the ``normal`` regime require the central bank to lean against the wind to inflationary pressure from CPI and housing inflation, while the central bank is recommended to accommodate it in the other regime.

Decomposing G7 Business Cycle

Sungjin Cho,Jangryoul Kim 서울大學校經濟硏究所 2011 經濟論集 Vol.50 No.2

A Re-evaluation of Housing Wealth Effect in Korea

김장렬,이항용,Kim, Jangryoul,Lee, Hangyong Korea Development Institute 2008 KDI Journal of Economic Policy (KDI JEP) Vol.30 No.2

본고에서 우리는 한국의 주택 부 효과의 크기를 재검토한다. 이를 위해 주택가격 상승에 대한 주택 보유자 소비지출의 반응인 '순수한' 주택 부 효과의 크기를 알아보는 데 중점을 둔다. 순수한 주택 부 효과를 측정하기 위해 거시시계열 자료를 이용할 경우, 주택 보유여부와 적절한 소비지출변수의 선정이라는 두 가지 문제가 제기된다. 우리는 먼저 비 주택 소비(non-housing consumption)가 보다 적절한 소비지출변수임을 보이며, 그 이유로 주택소비(housing consumption)의 상당 부분이 주택 보유자들의 실제로 지불하지 않는 귀속임대료(imputed rents)임을 제시한다. 이어서 우리는 거시시계열 자료로부터 구한 주택 부 효과의 크기를 얼마나 수정해야 주택보유자에의 순수한 주택 부 효과를 추정할 수 있는가를 살펴본다. 이를 위해 두 개의 구조적 모형을 설정하여, 전체 소비지출 중에서 주택 보유자 소비지출의 비중을 추정한다. 주택 보유자의 소비지출 비중을 감안하여 수정된 주택부의 효과는, 거시시계열을 이용하여 구한 통상적인 주택 부 효과의 추정치보다 크게 나타난다. This paper attempts to re-evaluate the size of housing wealth effect in Korea. Our focus is on the size of 'genuine' housing wealth effect, i.e., the response of consumption spending by home-owners to the changes in housing wealth. Two issues show up while we estimate the 'genuine' wealth effects using aggregate time series data: the issues around home ownership and proper measure of consumption. We first argue that it is more appropriate to use non-housing consumption, because housing consumption is in large part not of the choice of home owners but the imputed rents they do not actually choose to pay. We then proceed to address the issue of home ownership, by examining how much to revise the estimates of housing wealth effect obtained from aggregate non-housing consumption data. We construct two structural models and estimate the share of home-owners' consumption in those models' context. It is found that, if properly revised in light of the estimated consumption shares of home-owners, the magnitude of resulting housing wealth effects are larger than what simple time series regressions imply.