The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ... more The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. The present is a technical Appendix to and presents detailed simulations of the proposed methodology and additional empirical results.
International Journal of Shipping and Transport Logistics
We develop the Shipping Industry Risk Sentiment Index (SRSI) to measure risk sentiment in Korea's... more We develop the Shipping Industry Risk Sentiment Index (SRSI) to measure risk sentiment in Korea's shipping industry. The index is based on the frequency of news articles in Korean newspapers that contain terms related to the six C's of credit suggested by . The dynamics of the index show that it spikes near tight periods of elevated risk sentiment including global financial crisis and the court receivership of Korea's major shipping companies. We investigate predictive power of the index by using an autoregressive distributed lag (ARDL) model and impulse response functions from local projections. Empirical evidence shows that SRSI reflects risk sentiment in shipping industry and contains useful information to understand market situations.
The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ... more The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. In the present paper we propose more general STAR transition functions which encompass both threshold nonlinearity and asymmetric e¤ects. Our framework allows for a gradual adjustment from one regime to another, and considers threshold e¤ects by encompassing other existing models, such as TAR models. We apply our methodology to three di¤erent exchange rate data-sets, one for developing countries, and o ¢ cial nominal exchange rates, the second emerging market economies using black market exchange rates and the third for OECD economies.
This study empirically tests the presence of rational bubbles in the ship prices using time serie... more This study empirically tests the presence of rational bubbles in the ship prices using time series data from October 1996 to April 2017. To detect the existence of ship prices' rational bubbles, we use integration and cointegration tests, which were proposed by Campbell and Shiller(1987) and , for circumventing misspecification of ship price model and applying the bubble test to nonstationary time series. The result of integration test supports existence of tanker price's rational bubble. The cointegration test also shows that drybulk ship and containership prices have been overvalued relative to the market fundamental, drybulk and container freight rates, due to non-stationary rational bubbles. These results provide Korean shipping industry and authorities implications that anticyclical ship investment and long-term and steady fleet capacity expansion policy are needed.
Journal of Korean Navigation and Port Reserch, 2020
In this paper we examined a novel extension of the convergence empirics for the maritime business... more In this paper we examined a novel extension of the convergence empirics for the maritime business cycle which considers structure breaks and/or changes. To provide theoretical justification, the convergence hypothesis uses the relaxed assumption to technology shocks. Based on the recent empirical results provided by Kim and Chang (2020), we consider nonlinear dynamics that capture the properties on structural changes in the equilibrium adjustment process. This approach bridges the gap between the theoretical framework and empirical specifications. In particular, we applied the convergence hypothesis to the multiple structure change model for the maritime business cycle. Our application to the maritime data showed support of the convergence hypothesis allowing multiple structure changes during the high volatile period and offers additional insight into the forecasting maritime business cycles.
본 연구는 해운선사 주가수익률에 대하여 선박연료유 벙커가격이 미치는 영향에 대한 실증분석을 위해 첫째, 벙커가격 변동을 수요와 공급충격으로 각각 분리하여 고찰 하였다. 둘째,... more 본 연구는 해운선사 주가수익률에 대하여 선박연료유 벙커가격이 미치는 영향에 대한 실증분석을 위해 첫째, 벙커가격 변동을 수요와 공급충격으로 각각 분리하여 고찰 하였다. 둘째, 주가수익률에 대한 벙커가격변동, 수요충격, 공급충격의 연관성을 시차(lagged)모형과 동차(contemporaneous)모형으로 각각 회귀분석 하였고, 마지막으로 충격반응분석을 실시하였다. 분석결과, 공급충격은 균형을 중심으로 안정적인 움직임으로 나타난 반면 수요충격은 2008년 국제금융위기를 전후하여 상반되게 움직이는 것으로 나타났다. 수요·공급충격으로부터 주가수익률에 대한 회귀분석 결과는 동차모형에서 통계적으로 유의미한 결과를 보인다. 이는 시차모형이 통계적으로 유의하다는 기존 연구와 상반되는 결과이다. 이를 VAR 모형의 충격반응분석을 통해 살펴본 결과 수요·공급충격의 주가수익률에 대한 영향은 거의 존재하지 않는 것으로 나타났다.
The goal of this study is empirically to investigate the asymmetric relationship between two vari... more The goal of this study is empirically to investigate the asymmetric relationship between two variables using the dry cargo freight rates and raw material price data from January 2012 to May 2018. First, we estimate the asymmetry of macroeconomic indicators of commodity prices by using a two -step threshold cointegration test. Second, the asymmetric relation test of the trade balance of existing commodity price changes is tested by bypassing to the high frequency dry cargo freight rate index. As a result of the estimation, in contrast to the existing linear analysis, each boundary value for the lower limit and the upper limit has different asymmetry. This implies that the period of fluctuation of the sudden residual that causes irregular rate of return fluctuations does not establish a long term equilibrium relationship between the raw material price and the dry cargo freight rate. Therefore, in order to consider the sudden price change in the analysis, it is necessary to include the band of inaction that controls the irregular volatility, which is consistent with the asymmetry hypothesis.
In this paper, we use a logit model to predict the probability of default for Korean shipping com... more In this paper, we use a logit model to predict the probability of default for Korean shipping companies. We explore numerous financial ratios to find predictors of a shipping firm’s failure and construct four default prediction models. The results suggest that a model with industry specific indicators outperforms other models in predictive ability. This finding indicates that utilizing information about unique financial characteristics of the shipping industry may enhance the performance of default prediction models. Given the importance of the shipping industry in the Korean economy, this study can benefit both policymakers and market participants.
The purpose of this investigation is to analyze the synchronization between the representative gl... more The purpose of this investigation is to analyze the synchronization between the representative global freight index, the Baltic Dry bulk Index (BDI) and the China Container Freight Index (CCFI) with monthly data from 2000 to 2016. Using the non-stationarity of the business cycle that is able to include common trends, we employ the Engle-Granger 2 stage co-integration test and found no synchronization. On the contrary, we additionally estimated the causality between the markets and revealed the causality, which implies that the Chinese economy has a significant effect on the global market. The results of this empirical analysis demonstrate that the CCFI of China is appropriate for analyzing the shipping industry. In practice, this means that it is more appropriate to include CCFI in the global market outlook than use it as a substitute for the global freight rate index, the BDI. This is a case study of the synchronization of the economic fluctuations of the shipping industry. It suggests that the economic fluctuations of China need to be considered in the unstable global market forecast. In particular, this case applies to the fluctuations in the shipping industry synchronism and provides important results in scientific terms.
Journal of International Financial Markets, Institutions and Money, 2015
In this paper we propose a novel empirical extension of the standard market microstructure order ... more In this paper we propose a novel empirical extension of the standard market microstructure order ‡ow model. The main idea is that heterogeneity of beliefs in the foreign exchange market can cause model instability and such instability has not been fully accounted for in the existing empirical literature. We investigate this issue using two di¤erent data sets and focusing on out-of-sample forecasts. Forecasting power is measured using standard statistical tests and, additionally, using an alternative approach based on measuring the economic value of forecasts after building a portfolio of assets. We …nd there is a substantial economic value on conditioning on the proposed models.
Review of Quantitative Finance and Accounting, 2012
This paper investigates the (break) stationarity null hypothesis using data for 25 interest rates... more This paper investigates the (break) stationarity null hypothesis using data for 25 interest rates with di¤erent maturities and risk characteristics in Canada and the US. In contrast to a large part of the literature, this paper reports strong empirical evidence in favour of the null hypothesis of stationarity for the interest rate series.
The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ... more The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. In the present paper we propose more general STAR transition functions which encompass both threshold nonlinearity and asymmetric e¤ects. Our framework allows for a gradual adjustment from one regime to another, and considers threshold e¤ects by encompassing other existing models, such as TAR models. We apply our methodology to three di¤erent exchange rate data-sets, one for developing countries, and o¢ cial nominal exchange rates, the second emerging market economies using black market exchange rates and the third for OECD economies.
The large appreciation and depreciation of the US dollar in the 1980s stimulated an important deb... more The large appreciation and depreciation of the US dollar in the 1980s stimulated an important debate on the usefulness of unit root tests in the presence of structural breaks. In this paper, we propose a simple model to describe the evolution of the real exchange rate. We then propose a more general smooth transition (STR) function than has hitherto been employed, which is able to capture structural changes along the (long-run) equilibrium path, and show that this is consistent with our economic model. Our framework allows for a gradual adjustment between regimes and allows for underand/or over-valued exchange rate adjustments. Using monthly and quarterly data for up to twenty OECD countries, we apply our methodology to investigate the univariate time series properties of CPI-based real exchange rates with both the U.S. dollar and German mark as the numeraire currencies. The empirical results show that, for more than half of the quarterly series, the evidence in favour of the stationarity of the real exchange rate was clearer in the sub-sample period post-1980.
The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ... more The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. The present is a technical Appendix to and presents detailed simulations of the proposed methodology and additional empirical results.
International Journal of Shipping and Transport Logistics
We develop the Shipping Industry Risk Sentiment Index (SRSI) to measure risk sentiment in Korea's... more We develop the Shipping Industry Risk Sentiment Index (SRSI) to measure risk sentiment in Korea's shipping industry. The index is based on the frequency of news articles in Korean newspapers that contain terms related to the six C's of credit suggested by . The dynamics of the index show that it spikes near tight periods of elevated risk sentiment including global financial crisis and the court receivership of Korea's major shipping companies. We investigate predictive power of the index by using an autoregressive distributed lag (ARDL) model and impulse response functions from local projections. Empirical evidence shows that SRSI reflects risk sentiment in shipping industry and contains useful information to understand market situations.
The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ... more The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. In the present paper we propose more general STAR transition functions which encompass both threshold nonlinearity and asymmetric e¤ects. Our framework allows for a gradual adjustment from one regime to another, and considers threshold e¤ects by encompassing other existing models, such as TAR models. We apply our methodology to three di¤erent exchange rate data-sets, one for developing countries, and o ¢ cial nominal exchange rates, the second emerging market economies using black market exchange rates and the third for OECD economies.
This study empirically tests the presence of rational bubbles in the ship prices using time serie... more This study empirically tests the presence of rational bubbles in the ship prices using time series data from October 1996 to April 2017. To detect the existence of ship prices' rational bubbles, we use integration and cointegration tests, which were proposed by Campbell and Shiller(1987) and , for circumventing misspecification of ship price model and applying the bubble test to nonstationary time series. The result of integration test supports existence of tanker price's rational bubble. The cointegration test also shows that drybulk ship and containership prices have been overvalued relative to the market fundamental, drybulk and container freight rates, due to non-stationary rational bubbles. These results provide Korean shipping industry and authorities implications that anticyclical ship investment and long-term and steady fleet capacity expansion policy are needed.
Journal of Korean Navigation and Port Reserch, 2020
In this paper we examined a novel extension of the convergence empirics for the maritime business... more In this paper we examined a novel extension of the convergence empirics for the maritime business cycle which considers structure breaks and/or changes. To provide theoretical justification, the convergence hypothesis uses the relaxed assumption to technology shocks. Based on the recent empirical results provided by Kim and Chang (2020), we consider nonlinear dynamics that capture the properties on structural changes in the equilibrium adjustment process. This approach bridges the gap between the theoretical framework and empirical specifications. In particular, we applied the convergence hypothesis to the multiple structure change model for the maritime business cycle. Our application to the maritime data showed support of the convergence hypothesis allowing multiple structure changes during the high volatile period and offers additional insight into the forecasting maritime business cycles.
본 연구는 해운선사 주가수익률에 대하여 선박연료유 벙커가격이 미치는 영향에 대한 실증분석을 위해 첫째, 벙커가격 변동을 수요와 공급충격으로 각각 분리하여 고찰 하였다. 둘째,... more 본 연구는 해운선사 주가수익률에 대하여 선박연료유 벙커가격이 미치는 영향에 대한 실증분석을 위해 첫째, 벙커가격 변동을 수요와 공급충격으로 각각 분리하여 고찰 하였다. 둘째, 주가수익률에 대한 벙커가격변동, 수요충격, 공급충격의 연관성을 시차(lagged)모형과 동차(contemporaneous)모형으로 각각 회귀분석 하였고, 마지막으로 충격반응분석을 실시하였다. 분석결과, 공급충격은 균형을 중심으로 안정적인 움직임으로 나타난 반면 수요충격은 2008년 국제금융위기를 전후하여 상반되게 움직이는 것으로 나타났다. 수요·공급충격으로부터 주가수익률에 대한 회귀분석 결과는 동차모형에서 통계적으로 유의미한 결과를 보인다. 이는 시차모형이 통계적으로 유의하다는 기존 연구와 상반되는 결과이다. 이를 VAR 모형의 충격반응분석을 통해 살펴본 결과 수요·공급충격의 주가수익률에 대한 영향은 거의 존재하지 않는 것으로 나타났다.
The goal of this study is empirically to investigate the asymmetric relationship between two vari... more The goal of this study is empirically to investigate the asymmetric relationship between two variables using the dry cargo freight rates and raw material price data from January 2012 to May 2018. First, we estimate the asymmetry of macroeconomic indicators of commodity prices by using a two -step threshold cointegration test. Second, the asymmetric relation test of the trade balance of existing commodity price changes is tested by bypassing to the high frequency dry cargo freight rate index. As a result of the estimation, in contrast to the existing linear analysis, each boundary value for the lower limit and the upper limit has different asymmetry. This implies that the period of fluctuation of the sudden residual that causes irregular rate of return fluctuations does not establish a long term equilibrium relationship between the raw material price and the dry cargo freight rate. Therefore, in order to consider the sudden price change in the analysis, it is necessary to include the band of inaction that controls the irregular volatility, which is consistent with the asymmetry hypothesis.
In this paper, we use a logit model to predict the probability of default for Korean shipping com... more In this paper, we use a logit model to predict the probability of default for Korean shipping companies. We explore numerous financial ratios to find predictors of a shipping firm’s failure and construct four default prediction models. The results suggest that a model with industry specific indicators outperforms other models in predictive ability. This finding indicates that utilizing information about unique financial characteristics of the shipping industry may enhance the performance of default prediction models. Given the importance of the shipping industry in the Korean economy, this study can benefit both policymakers and market participants.
The purpose of this investigation is to analyze the synchronization between the representative gl... more The purpose of this investigation is to analyze the synchronization between the representative global freight index, the Baltic Dry bulk Index (BDI) and the China Container Freight Index (CCFI) with monthly data from 2000 to 2016. Using the non-stationarity of the business cycle that is able to include common trends, we employ the Engle-Granger 2 stage co-integration test and found no synchronization. On the contrary, we additionally estimated the causality between the markets and revealed the causality, which implies that the Chinese economy has a significant effect on the global market. The results of this empirical analysis demonstrate that the CCFI of China is appropriate for analyzing the shipping industry. In practice, this means that it is more appropriate to include CCFI in the global market outlook than use it as a substitute for the global freight rate index, the BDI. This is a case study of the synchronization of the economic fluctuations of the shipping industry. It suggests that the economic fluctuations of China need to be considered in the unstable global market forecast. In particular, this case applies to the fluctuations in the shipping industry synchronism and provides important results in scientific terms.
Journal of International Financial Markets, Institutions and Money, 2015
In this paper we propose a novel empirical extension of the standard market microstructure order ... more In this paper we propose a novel empirical extension of the standard market microstructure order ‡ow model. The main idea is that heterogeneity of beliefs in the foreign exchange market can cause model instability and such instability has not been fully accounted for in the existing empirical literature. We investigate this issue using two di¤erent data sets and focusing on out-of-sample forecasts. Forecasting power is measured using standard statistical tests and, additionally, using an alternative approach based on measuring the economic value of forecasts after building a portfolio of assets. We …nd there is a substantial economic value on conditioning on the proposed models.
Review of Quantitative Finance and Accounting, 2012
This paper investigates the (break) stationarity null hypothesis using data for 25 interest rates... more This paper investigates the (break) stationarity null hypothesis using data for 25 interest rates with di¤erent maturities and risk characteristics in Canada and the US. In contrast to a large part of the literature, this paper reports strong empirical evidence in favour of the null hypothesis of stationarity for the interest rate series.
The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ... more The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. In the present paper we propose more general STAR transition functions which encompass both threshold nonlinearity and asymmetric e¤ects. Our framework allows for a gradual adjustment from one regime to another, and considers threshold e¤ects by encompassing other existing models, such as TAR models. We apply our methodology to three di¤erent exchange rate data-sets, one for developing countries, and o¢ cial nominal exchange rates, the second emerging market economies using black market exchange rates and the third for OECD economies.
The large appreciation and depreciation of the US dollar in the 1980s stimulated an important deb... more The large appreciation and depreciation of the US dollar in the 1980s stimulated an important debate on the usefulness of unit root tests in the presence of structural breaks. In this paper, we propose a simple model to describe the evolution of the real exchange rate. We then propose a more general smooth transition (STR) function than has hitherto been employed, which is able to capture structural changes along the (long-run) equilibrium path, and show that this is consistent with our economic model. Our framework allows for a gradual adjustment between regimes and allows for underand/or over-valued exchange rate adjustments. Using monthly and quarterly data for up to twenty OECD countries, we apply our methodology to investigate the univariate time series properties of CPI-based real exchange rates with both the U.S. dollar and German mark as the numeraire currencies. The empirical results show that, for more than half of the quarterly series, the evidence in favour of the stationarity of the real exchange rate was clearer in the sub-sample period post-1980.
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Papers by Hyunsok Kim