Seho Kim

Korean Macroeconomist. Research Economist at Danmarks Nationalbank (Central Bank of Denmark). PhD from the University of Maryland. Views are my own.

[Joseph Steinberg @jbsteinberg]

It's certainly true that cross-country growth regressions suffer from all kinds of identification problems, but I think we've still learned far more about what generates material improvements in living standards from macro-dev than micro-dev.

Empirical macro-dev research isn't bad just because it lacks clean causal identification. That's an impossible bar to meet for macro in general (at least if we want to explain a significant fraction of the economically meaningful variation). There are lots of very bad empirical macro-dev papers, of course, but there are also some good ones.

Take Dani Rodrik's 2008 paper on undervaluation and growth (https://t.co/j4NaF6lJlD). The main observation is that real exchange rate depreciation (relative to where a country's exchange rate "ought" to be based on its initial level of development) triggers persistent growth in developing countries, but not developed ones.

Rodrik's hypothesis is that market imperfections (e.g. financial frictions) that are pervasive in developing countries disproportionately affect the tradable sector (manufacturing relies more on external financing than services in the Rajan-Zingales sense), and depreciation alleviates the effects of these frictions by raising the relative price of tradables.

This is important because it tells policymakers that even when fixing the underlying institutional causes of poverty is hard, there may be some second-best options that involve distorting relative prices away from the laissez-faire equilibrium.

The paper shows convincing evidence that this is indeed the operative channel: undervaluation reallocates resources from services to industry, and the association between growth and undervaluation is largely explained by this reallocation in a two-stage regression. (IVs can be used to learn something about economics, not just to get identification!)

Rodrik is also not just cherry-picking Asian tigers: appreciation hurts growth in lots of African countries in his sample through the same channel. This, in and of itself, provides an important (if underappreciated) cautionary tale about the unintended consequences of foreign aid.

Rodrik's identification isn't clean (as Mike Woodford explains in a follow-on comment) and the paper wasn't published in a prestigious outlet (it's in the BPEA), but I think it teaches us more about development than the vast majority of micro-dev papers published in QJE & AER.

Moreover, macro-dev isn't just empirics, it's also theory and quantitative modeling. Take the 2019 Econometrica by Itskhoki and Moll (https://t.co/G1xWbJGODI).* I love this paper because it illustrates how market imperfections create a role for government to accelerate growth, but also highlights the tradeoffs and distributional tensions inherent in doing so: "The optimal policy intervention involves pro-business policies like suppressed wages in early stages of the transition, resulting in higher entrepreneurial profits and faster wealth accumulation."

Finally, even focusing specifically on the empirical part of macro-dev, it isn't just growth regressions. Like many other subfields of macro, it's also increasingly come to emphasize rigorous microdata work, despite the challenges in collecting this data in developing countries. My colleague, Diego Restuccia, exemplifies this trend with his work on African farm-level data.

Overall, I think this research program has been far more successful than many people think. Conversely, the elevation of clean identification as the primary goal of research in development economics has been far less successful in yielding useful insights than many people think. As John Cochrane argues (https://t.co/xOhYcJcVey), the primary goal of economic research should always be to explain economically-meaningful variation, even if doing so is inherently messy.

* This is the paper I tried (and largely failed) to write in grad school when I was thinking about Rodrik's empirical work. My attempt is preserved for posterity here: https://t.co/IcGxHyWoKy. It's amazing to look back and see how far I've come as a researcher in 15 years!

[Pontus Rendahl @pontus_rendahl]

My favourite macro conference of the year just announced its call for papers! It's mainly intended for "juniors" (=PhD students, Assistant and recently Associate profs). Tight deadline, so apply before April 13.

RT if you think someone else might be interested.

[Lisbon Macro Workshop @LisbonMacro]

Calling all macroeconomists! The 5th Lisbon Macro Workshop is happening on August 28-29! Beach venue, great papers. Submit here: https://t.co/vo2i2tD60B

[Martha Gimbel @marthagimbel]

This from @alexolegimas and @soumitrashukla9 is by far the best thing I’ve read on how to think about how AI may affect the labor market. Absolutely required reading. https://t.co/DbDVc2nn9c

[Martha Gimbel @marthagimbel]

Many of us are trying to figure out where the AI labor market transition may be going. But that's fundamentally unknowable. So instead of trying to predict the future we can instead look back to try to figure out what may be coming...by reading 19th c english literature 1/

[Seho Kim @EconSehoKim]

@td_econ Congratulations, Thomas :)

[Francesco Furlanetto 🇺🇦 @francescofurla8]

13th edition of the joint conference @NorgesBank @nationalbanken @bundesbank This year in Copenhagen with @ben_moll Yuriy Gorodnichenko and Swati Dinghra. Send your best papers! 🇳🇴🇩🇰🇩🇪 https://t.co/7GsLuCBVy6

[Francesco Furlanetto 🇺🇦 @francescofurla8]

“Monetary Policy after the Inflation Surge” on Monday at @NorgesBank jointly organized with @bundesbank and @nationalbanken 🇳🇴🇩🇪🇩🇰

[Lisbon Macro Workshop @LisbonMacro]

A big thank you to all presenters and discussants for the insightful and productive discussions at this year’s workshop. Looking forward to seeing you all again next year!

[Seho Kim @EconSehoKim]

Thank you very much to the organizers, presenters, and discussants. It was a thought-provoking conference in a wonderful location :) Special thanks to John Kramer for his very helpful discussion.

[Lisbon Macro Workshop @LisbonMacro]

@EconSehoKim shows that lowering the economic cost of unemployment encourages workers to join riskier startups, increasing experimentation & productivity growth. In a firm dynamics model with labor frictions, lower vacancy creation costs further raise aggregate productivity.

[Filip Rozsypal @RozsypalFilip]

We were very happy to host @prtjns at @nationalbanken. We learned a lot about how firm respond to demand shocks, how it affects aggregate output and firm dynamics in general.

[Filip Rozsypal @RozsypalFilip]

Today at the @nationalbanken research seminar, @OskarNSkans shared his findings about the importance of match quality on the level and the cyclicality of wage returns. For details, check his paper “Outside options and the sharing of match-specific rents”

[Filip Rozsypal @RozsypalFilip]

Today we held 7th Local Macro People of Copenhagen (L-MPC) workshop at @nationalbanken. Great talks by @jvkramer1 about oil shocks and monetary policy in Germany, and @CPHoeck on wages and tenure.

[Thomas Drechsel @td_econ]

Thanks so much to @DavidBeckworth and @Macro_Musings for having me on the podcast!

We had a great conversation about the economic effects of political pressure on the Fed and new methods for estimating monetary policy shocks.

Full episode link in the thread below.

[Thomas Drechsel @td_econ]

The October issue of the JME is out

Happy to see our paper 𝐌𝐚𝐜𝐫𝐨𝐩𝐫𝐮𝐝𝐞𝐧𝐭𝐢𝐚𝐥 𝐏𝐨𝐥𝐢𝐜𝐲 𝐰𝐢𝐭𝐡 𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬-𝐁𝐚𝐬𝐞𝐝 𝐁𝐨𝐫𝐫𝐨𝐰𝐢𝐧𝐠 𝐂𝐨𝐧𝐬𝐭𝐫𝐚𝐢𝐧𝐭𝐬 published there!

This is joint work with my great coauthor @EconSehoKim

https://t.co/SVenVx2Ecy

[Saman Darougheh @DaroughehSaman]

I just arrived home from four days of intensive macroeconomics at NorMac that I can only recommend: a great program embedded in a great setup. Let me highlight two papers:

[Seho Kim @EconSehoKim]

My first time at Normac as a researcher for @nationalbanken! It was a wonderful experience, filled with interesting papers and great people!

[Morten O. Ravn @MortenORavn]

And NorMac 2024, the 16th edition in Snekkersten, is drawing to an end. Thanks to everyone for 4 days of Economics and fun, and see you next year!

[Thomas Drechsel @td_econ]

My paper with Seho Kim

"Macroprudential policy with earnings-based borrowing constraints"

is now in press at the 𝑱𝒐𝒖𝒓𝒏𝒂𝒍 𝒐𝒇 𝑴𝒐𝒏𝒆𝒕𝒂𝒓𝒚 𝑬𝒄𝒐𝒏𝒐𝒎𝒊𝒄𝒔
https://t.co/c2vLweJfM1

Thank you to everyone who provided helpful feedback on this work!