KOR

Research Staff

Research Staff

Jung, Whayoung Research Fellow Macro-Financial Analysis

Profile

Education
Ph.D., Economics, University of Illinois at Urbana-Champaign, 2020
M.A., Economics, University of Illinois at Urbana-Champaign, 2018
B.S., Statistics, B.A., Economics, Seoul National University, 2009
Professional Experience
Research Fellow, Korea Capital Market Institute, 2020.7-
Teaching/Research Assistant, University of Illinois at Urbana-Champaign, 2016-2020
Economist, Bank of Korea, 2009-2015

Publications

Opinion

Changes in Household Assets and Debts: Characteristics and Implications / Jul. 26, 2022
In a microdata-based analysis of changes in household assets, the wealth gap between Korea’s households has grown since 2017, primarily driven by real estate assets. Since households with a greater net worth tend to have a larger share of real estate holdings, property price growth contributes to a widening wealth gap. In terms of indebtedness, households with their heads aged under 50 have seen their financial liabilities ballooning due to the increase in housing loans. It is notable that the purpose of loans taken out by household heads under the age of 50 has varied by the size of household net worth. To be specific, the share of loans for leasehold (jeonse) or security deposits has been increasing among households in the bottom 60% net worth segment, while households in the top 40% have a larger share of loans for residential housing purchases.In Korea, the financial structure of households is susceptible to real estate price fluctuations as they have a relatively larger share of property assets. In this regard, the government should strive to prevent property prices from soaring sharply by managing housing supply and demand and financial conditions. It is also noteworthy that those aged under 50 have recently seen their financial liabilities rising substantially on the back of real estate price increases over the past several years. What is needed at this juncture is thorough preparation to keep financially unstable households from acting as weak points in the economy.
Risk Factors in Korea’s Bond Market amid Tightening Financial Conditions / May. 03, 2022
The yields on KTBs are rising steeply as upward pressure on interest rates-the Fed’s earlier-than-expected tightening of monetary policy and rising domestic inflation-mounts. In the KTB market, a plunge in KTB prices and rising volatility have recently dampened investor sentiment. Furthermore, an imbalance between supply and demand resulting from the increase in KTB issuance and weaker demand from major investors have reduced liquidity in the KTB market. In the meantime, a sharp increase in interest rates seems to have a relatively bigger impact on Korea’s corporate bond market, thereby deteriorating liquidity. In the course of monetary policy normalization, a proper cushion needs to be arranged to prevent a steep decline in liquidity of the bond market. Notably, decreasing liquidity in the KTB market could result in a liquidity crunch across the financial market and a surge in financing costs. Accordingly, Bank of Korea should seek to maintain stability in the financial market by purchasing KTBs if liquidity conditions become tighter. The Korean government needs to take a prudent approach to the increase in KTB issuance, considering growing concerns about the supply and demand imbalance of KTBs. Last but not least, the financial authorities should monitor firms with lower financial soundness to prevent deteriorating liquidity in the corporate bond market from escalating into credit risk.
The Recent Increase in Household Debt: Characteristics, Effects and Implications / Oct. 26, 2021
Amid loose financial conditions since the Covid-19 pandemic, household debt is rapidly increasing compared to household income. Increased household liquidity driven by high household indebtedness has heavily flowed into asset markets including real estate and stocks. In particular, with prolonged low interest rates, households are aggressively utilizing borrowings. Given negative effects of high household indebtedness on private consumption in the medium term, it is assumed that sluggish consumption including lower consumption propensity has already been underway. If household debt accumulation keeps undermining consumption in the private sector, it would exacerbate the economy’s vulnerability to shocks while eroding aggregate demand, which could weaken growth potential. With active policy measures by the Bank of Korea and the Korean government, household debt is expected to climb at a slower pace going forward. However, thorough monitoring is needed to ensure that higher debt servicing pressures arising from rate hikes would not lead to a rise in credit risk. In particular, the government needs to provide well-targeted fiscal support to prevent credit risks from further affecting the whole economy. Since shifts of monetary policy stances may result in high volatility in asset prices, more attention should be paid to risk factors that changes in economic conditions could pose.
Recent Issues and Challenges in KTB Market / Jun. 29, 2021
As internal and external demand contracted significantly due to Covid-19, the Korean government has been supporting economic recovery with an expansionary fiscal policy. Accordingly, the issuance of KTBs has sharply risen, causing a supply and demand imbalance that could increase an upward pressure on the interest rates. On another front, the Bank of Korea is signaling an earlier-than-expected rate hike on account of financial stability concerns such as rising household debt. As the upward trend of interest rates continues amid stronger global economic recovery, any additional upward pressure—for example, an imbalance between KTB supply and demand, or a base rate increase—could further exacerbate the stability of the financial markets. For an effective policy mix, the government and the Bank of Korea need to respond with more efficient fiscal spending and more prudent monetary policy, respectively. In addition, the KTB issuance system needs an improvement that sets its limit on the net increase for more flexible issuance depending on market conditions.

Other Activities

Research
[Working Papers]

- Quantile Impulse Response Analysis with Applications in Macroeconomics and Finance (with Ji Hyung Lee), accepted at Advances in Econometrics
- Estimation and Inference of Quantile Impulse Response Functions by Local Projections: with Applications to VaR Dynamics (with Heejoon Han and Ji Hyung Lee), accepted at Journal of Financial Econometrics