The 1st Winter Workshop
in Recent Advances in Macroeconomics

January 20-21, 2022

ContentsAbout
The 1st Winter Workshop in Recent Advances in Macroeconomics . . . . . . . . . . .
Organizing committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33
3Timetable
Thursday, 20 of January, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Friday, 21 of January, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

445

List of Abstracts
Thursday, 20 of January, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Friday, 21 of January, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

669

List of Participants (conﬁrmed as of January 11, 2022)

12Logistics
How to get connected? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13132About

The 1st Winter Workshop in Recent Advances in Macroeconomics
The Institute of Social and Economic Research (ISER) and the Osaka School of International Public Policy(OSIPP), Osaka University, the Department of Economics, Korea University, and the Department of Economics,
University of Surrey are virtually organizing a workshop in macroeconomics on January 20th and 21st, 2022.
The aim of the workshop is to bring together (junior) economists across East Asia and North America witha strong interest in Macroeconomics, and to generate a friendly environment with intensive interaction,
not only during the presentations but also informally before and after. A limited number of papers will bepresented (10 over two days) to allow maximum time for discussion.

Organizing committee
Tamon Asonuma
Yunjong Eo
Hiro Ishise
Hyungseok Joo
Donghoon Yoo

International Monetary Fund (IMF)
Department of Economics, Korea University
Osaka School of International Public Policy (OSIPP), Osaka University
School of Economics, University of Surrey
Institute of Social and Economic Research (ISER), Osaka University

3Timetable

S1–S6: Invited Sessions, J1–J4: Young Economist Sessions.

Thursday, 20 of January, 2022
8:25–8:30
8:30–9:30

S1

9:30–9:40
9:40–10:40

S2

10:40–10:50
10:50–11:20

J1

10:50–11:20

J2

11:20–12:00
12:00–13:00
13:00–14:00

4

S3

Welcome remarks
Huixin Bi
Public Pension Reforms andFederal Reserve Bank ofRetirement Decision: Narrative
Kansas City
Evidence and Aggregate Implications
Break
Konstantin Kucheryavyy
Welfare Gains from International Risk
University of Tokyo
Sharing and (Non-)Specialization
Break
Sun Ho Lee
Term Premiums and Regime-Switching
Korea University
Prices of Macro Risks
Xiaohan Wang
Renegotiation After Sovereign Default:
Shanghai University of
Bygones No Longer
Finance and Economics
Coﬀee breakNominal Exchange Rate Variability,
Hiro Ishise
Industry-level Nominal Wage Rigidity,
Osaka School of International
Public Policy
and the Pattern of TradeDiscussion

Friday, 21 of January, 2022
8:30–9:30

S4

Pierre De Leo
University of Maryland

Break

9:30–9:40
9:40–10:40

S5

10:50–11:20

J3

10:50–11:20

J4

11:20–12:00

13:00–14:00

Zhesheng Qiu
City University of Hong KongNaïve Consumers in Business Cycles
Break

10:40–10:50

12:00–13:00

Imperfect Exchange Rate Expectations

S6Shuang Feng
Sovereign Debt: A Quantitative
Shandong University ofComparative Investigation of theFinance and EconomicsPartial Default Mechanism
Yeil Lee
Changing Eﬀects of Monetary Policy inSeoul National University
Korea and ASEAN countries
Coﬀee break
Trade costs of sovereign debt
Akira Sasahara
restructurings: Does a market friendly
Keio University
approach improve the outcome?
Discussion

5

List of Abstracts

Thursday, 20 of January, 2022
Public Pension Reforms and Retirement Decision: Narrative Evidence and Aggregate Implications
Huixin Bi1 , Sarah Zubairy2
12

S1

Research Department, The Federal Reserve Bank of Kansas City
Department of Economics, Texas A&M University

We construct a database of public pension policy changes with motivation and implementation
information for ten OECD countries. Structural pension reforms, motivated by long-run sustainability concerns, often come with prolonged phase-in periods. In response to pension retrenchments
implemented immediately, people close to retirement stay in the work force longer. News about
future pension retrenchments with implementation lags, however, is likely to lead this group toexit the labor market. This decline in the labor force participation rate is particularly strong forreforms with long lags, ones that introduce fundamental policy changes, and where citizens havelower trust in the government.

Welfare Gains from International Risk Sharing and (Non-)Specialization
Konstantin Kucheryavyy

S2Graduate School of Public Policy, University of Tokyo
The overwhelming consensus is that access to international risk sharing increases specialization incomparative advantage industries, which has lead to speculation that international risk sharing
could bring sizeable welfare gains to countries through this endogenous production channel. I
challenge this view in two ways. First, I use an extension of the standard 2x2 Ricardian modelwith productivity shocks and ﬁnancial markets and show the eﬀect of international risk sharing on
specialization is ambiguous and depends on the structure of the variance-covariance matrix of productivity shocks across countries and industries. In particular, if productivity shocks are correlated
within but not across countries, then international risk sharing can actually lead to a decrease in
specialization through terms-of-trade eﬀects. Second, I quantitatively assess the magnitude of thisendogenous production channel on welfare by extending the model to a continuum of goods and Iargue that welfare gains are small relative to the gains from consumption smoothing regardless ofchanges in specialization.

6Changing Eﬀects of Monetary Policy in Korea and ASEAN countries
Sunho Lee1 , Kyu Ho Kang1
1J1

Department of Economics, Korea University

We examine regime changes in the role of possibly unspanned macro factors in a dynamic term
structure model of interest rates. To do this, we consider the unspanned macro-risks model ofJoslin, Priebsch, and Singleton (2014) with the arbitrage-free Nelson-Siegel restriction. Then, we
incorporate a Markov process into the model, so that the eﬀect of the macro factors on the term
premia is allowed to evolve over time. Under this framework, we classify two macro factors(real activity and inﬂation) into three categories: (i) ones with unspanned macro risk, (ii) ones
without unspanned macro-risk, or (iii) ones with regime-switching unspanned macro risk. Given
the three categories for the two variables, there are a total of 32 combinations. The models with
diﬀerent combinations are estimated and compared using a Bayesian approach. Based on theUS monthly data from 1990 to 2007, the model with one regime-switching unspanned macrorisk is most supported by the data. Speciﬁcally, the real activity is found to include unspanned
information during recessions. Our ﬁnding implies that the spanning hypothesis seems to holdduring non-recession periods.

Renegotiation After Sovereign Default: Bygones No Longer
Xiaohan Wang

J2

School of Finance, Shanghai University of Finance and Economics
In the aftermath of a sovereign default, debt recovery is determined through a restructuring process.
This recovery is important for both the country and the creditors. For the country, debt recovery
determines its debt burden after exiting default and impacts macroeconomic performance. For thecreditors, recovery reduces their losses. Using the dataset of Cruces and Trebesch (2013), I showthat the level of recovery is positively related with the level of defaulted debt. In light of this ﬁnding,
I build a framework that rationalizes this strong association by employing the Kalai-Smorodinsky
bargaining solution as a model of sovereign debt renegotiation, while jointly matching standard
emerging markets’ behavior. I identify the key assumptions that enable the model to match thedata. I also show that the standard model using Nash bargaining protocol results in debt recovery
being unrelated to the outstanding level of debt. A debt relief program is then studied to highlightthe diﬀerence between the two models in welfare implications.

7Nominal Exchange Rate Variability, Industry-level Nominal Wage Rigidity, andthe Pattern of Trade
Hiro Ishise

S3

Osaka School of International Public Policy, Osaka University
Does the stabilization of the nominal exchange rate stimulate international trade? This paper
theoretically and empirically revisits this old but unresolved question by considering the diﬀerential
impacts across sectors, particularly focusing on the interactive role with industry-level nominal
wage rigidity. A stylized model clariﬁes mechanisms; trade may increase or decrease after a change
in the nominal exchange rate. I then show that nominal exchange rate variability reduces trade in
the long run if a sector faces wage rigidity. A testable implication is that a country whose nominal
exchange rate varies less has a comparative advantage in industries that intensively use sticky-wage
workers. World trade data supports this comparative-advantage-type prediction.

8Friday, 21 of January, 2022
Imperfect Exchange Rate Expectations
Giacomo Candian1 , Pierre De Leo212S4

Department of Applied Economics, HEC Montréal
Department of Economics, University of Maryland

Using survey data, we document that predictable exchange rate forecast errors are responsible
for the uncovered-interest-parity (UIP) puzzle and its reversal at longer horizons. We develop
a general-equilibrium model based on shock misperception and over-extrapolative beliefs thatreconciles these and other major exchange rate puzzles. These beliefs distortions generate bothunder- and overreaction of expectations that account for the predictability of forecast errors about
interest rates, exchange rates, and other macroeconomic indicators. In the model, forecast errors
are endogenous to monetary policy and explain the change in the behavior of UIP deviations thatemerged after the global ﬁnancial crisis.

Naïve Consumers in Business Cycles
Zhesheng Qiu

S5

Department of Economics and Finance, City University of Hong Kong
Systematic biases in expectations have been modelled as a lack of knowledge on either the aggregate state of the economy or the true DGP. This project provides a method to identify the laterfrom the former, without using panel data. The gist of the idea is to use the average nowcasts
and forecasts to control the information sets. When applying this method to Michigan Survey ofConsumers, the results indicate that consumers understand very little about the true DGP of GDP
growth. We discuss what models are (not) consistent with such patterns and the corresponding
implications for business cycles.

9

Sovereign Debt: A Quantitative Comparative Investigation of the Partial Default
Mechanism
Manoj Atolia1 , Shuang Feng2
12J3

Department of Economics, Florida State University
School of Economics, Shandong University of Finance and Economics

We quantitatively explore the implications of the partial default mechanism for the dynamics ofsovereign debt and default in a small open economy. The model features endogenous partial
default and preemptive recovery on the defaulted amount with direct utility cost of default, insteadof the exclusion from international ﬁnancial markets. The model is calibrated to Argentina andcompared to the traditional full default models. We show that with our partial default framework,(1) the model with endowment not only matches the mean spread on debt and the debt-to-output
ratio, like the traditional models, but also matches both the default frequency and the default
rate; (2) the model with production, with investment as another margin to smooth consumption,
improves the ﬁt with data for the volatilities of consumption and spread on debt as well as thedebt service-to-output ratio (without signiﬁcant change in other moments), partially oﬀsetting
the weak performance of the endowment model; and (3) furthermore, the non-exclusion frominternational markets provides a more realistic pattern of the impulse responses of various macro
variables to economic shocks, which gives a better understanding of the propagation mechanismof partial default.

Changing Eﬀects of Monetary Policy in Korea and ASEAN countries
Joonyoung Hur1 , Soyoung Kim2 , Yeil Lee212

J4School of Economics, Sogang University
Department of Economics, Seoul National University

In this paper, we examine the time-variation in the eﬀectiveness of monetary policy in Korea andASEAN countries using a time-varying coeﬃcient vector autoregressive (TVC-VAR) model, estimatedwith data from 2000 Q1 to 2020 Q2/Q3. In particular, we assess how the eﬀects of monetary policy
on output have changed over time. Our results indicate that the expansionary eﬀects of monetary
policy display distinct time-varying patterns across the countries. In case of Korea and Indonesia,
in the very short run, the eﬀect of monetary policy seems to be weakened or maintained similarly,
but in the medium- to long-runs, the eﬀect has been strengthened in the 2010s. For Malaysia
and the Philippines, the eﬀectiveness of monetary policy seems to have gradually strengthened
during the entire period. Lastly, the results of Thailand are associated with wide error bands, whichmakes it diﬃcult to draw clear conclusions. However, there is a possibility that the eﬀectiveness ofmonetary policy maintained at a similar level during the entire sample period.

10Trade Collapses and Sovereign Debt Restructurings: Does a Market-Friendly
Approach Improve the Outcome?
Tamon Asonuma1 , Marcos Chamon1 , Akira Sasahara2
12S6International Monetary Fund
Faculty of Economics, Keio University

Sovereign debt restructurings are associated with heterogenous impacts on imports and exports
both across episodes and across sectors. Based on a novel sector-level dataset over 1975-2019,
we newly explain two dimensions of trade heterogeneity. First, restructuring strategies accountfor heterogeneity across restructuring episodes. Post-default restructurings are associated witha larger decline in imports (in value and volume), while preemptive restructuring—take place
preemptively without missing payments and going into default—are associated with milder decline
in exports (in value and volume). Second, the exchange rate channel accounts for heterogeneity
across sectors (types of goods) through both price and volume eﬀects. Sectors producing capital
goods suﬀer a larger decline in imports (in value and volume), but a miler increase in exports (invalue and volume) than those producing consumption goods.

11List of Participants (conﬁrmed as of January 11, 2022)
JaeBin Ahnm
Tamon Asonumam
Manoj Atoliam
Huixin Bip
Thang DaoYunjong Eom
Shuang Fengp
Ina Hajdinim
Hiro Ishisep,mHyungseok Joo
Mitsuru Katagirim
Hayato Katom
Kyunghun Kim
Konstantin Kucheryavyyp
Sun Ho Leep
Yeil Leep
Pierre De Leop
Guangyu Peim
Zhesheng Qiup
Akira Sasaharap
Xiaohan Wangp
Donghoon Yoop

: presenter; m moderator

12Seoul National University
International Monetary Fund
Florida State University
Federal Reserve Bank of Kansas City
Institute of Social and Economic Research, Osaka University
Korea University
Shandong University of Finance and Economics
Federal Reserve Bank of Cleveland
Osaka School of International Public Policy, Osaka University
University of Surrey
Hosei University
Osaka University
Hongik University
University of Tokyo
Korea University
Seoul National University
University of Maryland
The Chinese University of Hong Kong
City University of Hong Kong
Keio University
Shanghai University of Finance and Economics
Institute of Social and Economic Research, Osaka University

Logistics

This Conference will be held on Zoom and Gather.Town.
Presentations: For regular sessions, 60 minutes will be allocated to each paper: (i) 45 minutes forpaper presentation and (ii) 15 minutes for Q&A. For junior economist/doctoral students sessions:
30 minutes presentation.
Chatbox: To facilitate smooth presentation, we will set up a chat box to allow all panel participantsand audience to raise questions (rather than interrupting presenters’ presentation). Presenters
can choose any of three options to handle questions (please indicate your preference to chairs
before your presentation); (i) have co-authors take care of questions at Chat box, (ii) ask chairs
to interrupt and read questions during presentation, (iii) answer questions at the Q&A session or
small group meetings.
Small group meetings: During the coﬀee break and after the second sessions of the day, we will
set up zoom meetings and Gather.Town for discussion. Presenters, discussants and participants candiscuss on the paper after the session. Presenters can also answer questions to discussants in small
group meeting . The meetings are aimed to have more bilateral discussion and engagement.

How to get connected?
For S1–S10; J1 and J3, use the following zoom link (with passcode: 081239):

https://surrey-ac.zoom.us/j/96528323848?pwd=OVRMaTJzSVJiMXBQamVtRzNaancrdz09
For J2 and J4, use the following zoom link:

https://us02web.zoom.us/j/81852915714?pwd=TFBWNyt1SGRxTGxkbkhqMUpzRlBDZz09
For Gather.Town, use the following link:

https://gather.town/app/ajGSTbcpHyGrRrKj/onlineworkshopspace

This workshop is supported by JSPS KAKENHI Grants (#21H04397, #20H01495, #20K01546) and
BK21 FOUR R&E Center for Economics, Korea University.1
1This program booklet is created using the template from: https://github.com/maximelucas/AMCOS_booklet

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