Sangyup Choi's Books

Aggregate Uncertainty and Sectoral Productivity Growth

The Role of Credit Constraints

By: Sangyup Choi,Davide Furceri,Yi Huang,Mr.Prakash Loungani

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Aggregate Uncertainty and Sectoral Productivity Growth

The Role of Credit Constraints

By: Sangyup Choi,Davide Furceri,Yi Huang,Mr.Prakash Loungani

We show that an increase in aggregate uncertainty—measured by stock market volatility—reduces productivity growth more in industries that depend heavily on external finance. This effect is larger during recessions, when financing constraints are more likely to be binding, than during expansions. Our statistical method—a difference-in-difference approach using productivity growth for 25 industries for 18 advanced economies over the period 1985-2010—mitigates concerns with omitted variable bias and reverse causality. The results are robust to the inclusion of other sources of interaction effects, such as financial development (Rajan and Zingales, 1998) and counter-cyclical fiscal policy (Aghion et al., 2014). The results also hold if economic policy uncertainty (Baker et al., 2015) is used instead of stock market volatility as the measure of aggregate uncertainty.

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International Monetary Fund

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ISBN 10

1475526377

ISBN 13

9781475526370

International Bank Lending Channel of Monetary Policy

By: Silvia Albrizio,Sangyup Choi,Davide Furceri,Chansik Yoon

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International Bank Lending Channel of Monetary Policy

By: Silvia Albrizio,Sangyup Choi,Davide Furceri,Chansik Yoon

How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross-border bank lending. We find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross-border bank lending. The effect is weakened during periods of high uncertainty. In contrast, the effect is found to not vary according to the degree of borrower country riskiness, further weakening support for the international portfolio rebalancing channel.

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International Monetary Fund

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ISBN 10

1513519638

ISBN 13

9781513519630

Uncertainty and Unemployment

The Effects of Aggregate and Sectoral Channels

By: Sangyup Choi,Mr.Prakash Loungani

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Uncertainty and Unemployment

The Effects of Aggregate and Sectoral Channels

By: Sangyup Choi,Mr.Prakash Loungani

We study the role of uncertainty shocks in explaining unemployment dynamics, separating out the role of aggregate and sectoral channels. Using S&P500 data from the first quarter of 1957 to third quarter of 2014, we construct separate indices to measure aggregate and sectoral uncertainty and compare their effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model. We find that aggregate uncertainty leads to an immediate increase in unemployment, with the impact dissipating within a year. In contrast, sectoral uncertainty has a long-lived impact on unemployment, with the peak impact occurring after two years. The results are consistent with a view that the impact of aggregate uncertainty occurs through a “wait-and-see” mechanism while increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors.

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International Monetary Fund

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ISBN 10

1498356303

ISBN 13

9781498356305

International Fiscal-financial Spillovers: The Effect of Fiscal Shocks on Cross-border Bank Lending

By: Sangyup Choi,Davide Furceri,Chansik Yoon

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International Fiscal-financial Spillovers: The Effect of Fiscal Shocks on Cross-border Bank Lending

By: Sangyup Choi,Davide Furceri,Chansik Yoon

This paper sheds new light on the degree of international fiscal-financial spillovers by investigating the effect of domestic fiscal policies on cross-border bank lending. By estimating the dynamic response of U.S. cross-border bank lending towards the 45 recipient countries to exogenous domestic fiscal shocks (both measured by spending and revenue) between 1990Q1 and 2012Q4, we find that expansionary domestic fiscal shocks lead to a statistically significant increase in cross-border bank lending. The magnitude of the effect is also economically significant: the effect of 1 percent of GDP increase (decrease) in spending (revenue) is comparable to an exogenous decline in the federal funds rate. We also find that fiscal shocks tend to have larger effects during periods of recessions than expansions in the source country, and that the adverse effect of a fiscal consolidation is larger than the positive effect of the same size of a fiscal expansion. In contrast, we do not find systematic and statistically significant differences in the spillover effects across recipient countries depending on their exchange rate regime, although capital controls seem to play some moderating role. The extension of the analysis to a panel of 16 small open economies confirms the finding from the U.S. economy.

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International Monetary Fund

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ISBN 10

1513507915

ISBN 13

9781513507910

Uncertainty and Cross-Border Banking Flows

By: Sangyup Choi,Davide Furceri

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Uncertainty and Cross-Border Banking Flows

By: Sangyup Choi,Davide Furceri

While global uncertainty—measured by the VIX—has proven to be a robust global “push” factor of international capital flows, there has been no systematic study assessing the role of country-specific uncertainty as a key (pull and push) factor of international capital flows. This paper tries to fill this gap in the literature by examining the effects of country-specific uncertainty shocks on cross-border banking flows using the confidential Bank for International Settlements Locational Banking Statistics data. The dyadic structure of this data allows to disentangle supply and demand factors and to better identify the effect of uncertainty shocks on cross-border banking flows. The results of this analysis suggest that: (i) uncertainty is both a push and pull factor that robustly predicts a decrease in both outflows (retrenchment) and inflows (stops); (ii) global banks rebalance their lending towards safer foreign borrowers from local borrowers when facing higher uncertainty; (iii) this rebalancing occurs only towards advanced economies (flight to quality), but not emerging market economies.

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International Monetary Fund

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ISBN 10

1484336933

ISBN 13

9781484336939

Fiscal Stabilization and Growth

Evidence from Industry-level Data for Advanced and Developing Economies

By: Sangyup Choi,Davide Furceri,João Tovar Jalles

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Fiscal Stabilization and Growth

Evidence from Industry-level Data for Advanced and Developing Economies

By: Sangyup Choi,Davide Furceri,João Tovar Jalles

Medium-term growth can be enhanced by fiscal stabilization. However, to date, no systematic effort has been made to study the specific channels through which fiscal stabilization affects growth. This paper examines the effect of fiscal stabilization on industrial growth and how this effect depends on different technological characteristics. It does so by applying a difference-in-difference approach to an unbalanced panel of 22 manufacturing industries for 55 advanced and developing economies over the period 1970-2014. The results suggest that fiscal stabilization fosters growth in industries with: i) higher external financial dependence and lower asset fixity; ii) higher degree of labor intensity; iii) higher investment lumpiness and relationship-specific input usage. These effects tend to be larger during economic recessions. The results are robust to different measures of fiscal stabilization and the inclusion of various interactions between a broad set of macroeconomic variables and production technologies.

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International Monetary Fund

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ISBN 10

1484318501

ISBN 13

9781484318508

Oil Prices and Inflation Dynamics: Evidence from Advanced and Developing Economies

By: Sangyup Choi,Davide Furceri,Mr.Prakash Loungani,Mr.Saurabh Mishra,Marcos Poplawski-Ribeiro

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Oil Prices and Inflation Dynamics: Evidence from Advanced and Developing Economies

By: Sangyup Choi,Davide Furceri,Mr.Prakash Loungani,Mr.Saurabh Mishra,Marcos Poplawski-Ribeiro

We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10 percent increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage point on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a better conduct of monetary policy. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the this period.

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International Monetary Fund

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ISBN 10

1484316657

ISBN 13

9781484316658

Inflation Anchoring and Growth: Evidence from Sectoral Data

By: Sangyup Choi,Davide Furceri,Mr.Prakash Loungani

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Inflation Anchoring and Growth: Evidence from Sectoral Data

By: Sangyup Choi,Davide Furceri,Mr.Prakash Loungani

Central bankers often assert that low inflation and anchoring of inflation expectations are good for economic growth (Bernanke 2007, Plosser 2007). We test this claim using panel data on sectoral growth for 22 manufacturing industries for 36 advanced and emerging market economies over the period 1990-2014. Inflation anchoring in each country is measured as the response of inflation expectations to inflation surprises (Levin et al., 2004). We find that credit constrained industries—those characterized by high external financial dependence and R&D intensity and low asset tangibility—tend to grow faster in countries with well-anchored inflation expectations. The results are robust to controlling for the interaction between these characteristics and a broad set of macroeconomic variables over the sample period, such as financial development, inflation, the size of government, overall economic growth, monetary policy counter-cyclicality and the level of inflation. Importantly, the results suggest that it is inflation anchoring and not the level of inflation per se that has a significant effect on average industry growth. Finally, the results are robust to IV techniques, using as instruments indicators of monetary policy transparency and independence.

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International Monetary Fund

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ISBN 10

1484344200

ISBN 13

9781484344200

The Effects of Data Transparency Policy Reforms on Emerging Market Sovereign Bond Spreads

By: Sangyup Choi,Ms.Yuko Hashimoto

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The Effects of Data Transparency Policy Reforms on Emerging Market Sovereign Bond Spreads

By: Sangyup Choi,Ms.Yuko Hashimoto

We find that data transparency policy reforms, reflected in subscriptions to the IMF’s Data Standards Initiatives (SDDS and GDDS), reduce the spreads of emerging market sovereign bonds. To overcome endogeneity issues regarding a country’s decision to adopt such reforms, we first show that the reform decision is largely independent of its macroeconomic development. By using an event study, we find that subscriptions to the SDDS or GDDS leads to a 15 percent reduction in the spreads one year following such reforms. This finding is robust to various sensitivity tests, including careful consideration of the interdependence among the structural reforms.

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International Monetary Fund

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ISBN 10

1475589603

ISBN 13

9781475589603

Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach

By: Sangyup Choi,Tim Willems,Seung Yong Yoo

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Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach

By: Sangyup Choi,Tim Willems,Seung Yong Yoo

By combining industry-level data on output and prices with monetary policy rates for a panel of 88 countries, this paper analyzes how the effects of monetary policy vary with certain industry characteristics. Next to being interesting in their own right, our results are informative on the importance of various transmission mechanisms (as they are expected to vary systematically with the included characteristics). Rather than relying on standard monetary policy shock identification, we overcome the endogeneity problem by taking a differential approach (interacting our monetary policy measure with industry-level characteristics). Our results suggest that monetary contractions reduce output by more in industries featuring assets that are more difficult to collateralize (as predicted by the balance sheet channel) and in industries more reliant on international trade (as predicted by the exchange rate channel). Consistent with the financial accelerator mechanism, we find that the balance sheet channel becomes stronger during bad times. At the same time, we do not find evidence supporting the traditional interest rate channel of monetary policy; the same goes for the cost channel.

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