Sun Yong Kim

Sun Yong Kim

6th Year PhD Student, Finance Department

I will be on the AFA/AEA academic job market in Fall 2023/Spring 2024.

Research Interests: International Macro-Finance, Fiscal Policy, Asset Pricing

Research Overview: My main agenda studies the global ramifications of US fiscal policy.  My solo papers: i) US Fiscal Cycle, Risk-Sharing and the US Safety Puzzle and ii) Global Footprint of US Fiscal Policy tie the US fiscal condition directly to key puzzling phenomena in international macro-finance such as i) the US exorbitant privilege, ii) the dollar’s countercyclical dynamics, iii) the global financial cycle in risky asset prices and iv) the countercyclical US global wealth share. 

E: sunyong.kim@kellogg.northwestern.edu

CV: Link 

Personal Website: Link

 

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Education

Ph.D, Finance, Kellogg School of Management, Northwestern University, USA, 2024 (expected)
M.Sc, Finance and Economics, London School of Economics and Political Science (LSE), UK, 2018
B.Com (Honours), Finance and Economics, University of New South Wales (UNSW), Australia, 2016

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Committee

Dimitris Papanikolaou (Co-Chair)   John L. & Helen Professor of Finance, Kellogg School of Management, Northwestern University

Torben Andersen          (Co-Chair)  Nathan S. and Mary P. Sharp Professor of Finance, Kellogg School of Management, Northwestern University

Zhengyang Jiang                           Associate Professor of Finance, Kellogg School of Management, Northwestern University

Winston Wei Dou                           Assistant Professor of Finance, The Wharton School, University of Pennsylvania 

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Awards/Grants 

US Fiscal Cycle, Risk-Sharing and the US Safety Puzzle (JMP)

1. European Finance Association (EFA) Engelbert-Dockner Memorial Prize for the Best Paper by Young Researchers, Winner (2023)

2. Western Finance Association (WFA) Brattle Group PhD Candidate Award for Outstanding Research (2022) 

3. Financial Intermediation Research Society (FIRS) Travel Grant for PhD Presenters (2022) 

4. Macro-Finance Society (MFS) Travel Grant for PhD Poster Session Presenters (2022)

Global Footprint of US Fiscal Policy (Another Solo Paper)

5. Western Finance Association (WFA) Brattle Group PhD Candidate Award for Outstanding Research (2023) 

6. Financial Management Association (FMA) Best Paper in Investments, Winner (2023)

7. Asian Meeting of the Econometric Society (AMES) Young Scholar Fund (YSF) Award for Outstanding Research (2023) 

8. Becker Friedman Institute UChicago Macro-Finance Research Program (BFI-MFR) Travel Grant for PhD Poster Session Presenters (2022)

Other

9. Kellogg Financial Institutions and Markets Research Center Research Grant (2023)

10. European Finance Association (EFA) PhD Travel Grant (2022)

11. LSE WCIB Prize for Best Finance Masters Dissertation for “Momentum Risk Premium: A Long Run Perspective” (2018)

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Global Ramifications of US Fiscal Policy (Main Agenda)

1. US Fiscal Cycle, Risk Sharing and the US Safety Puzzle (JMP) [Latest Version] [SSRN] [Conference Slides][Seminar Slides]

Awards and Grants: i) European Finance Association (EFA) Engelbert-Dockner Memorial Prize for the Best Paper by Young Researchers, Winner (2023)

                                ii) Western Finance Association (WFA) Brattle Group PhD Candidate Award for Outstanding Research (2022) 

                               iii) Financial Intermediation Research Society (FIRS) Travel Grant for PhD Presenters (2022) 

                               iv) Macro-Finance Society (MFS) PhD Travel Grant (2022)

External Conferences, Seminars and Workshops: CEPR International Macroeconomics and Finance Meeting (IMF, 2023, Invited), Society for Economic Dynamics (SED, 2023), European Finance Association (EFA, 2023), Western Finance Association (WFA, 2022), Financial Intermediation Research Society (FIRS, 2022), Midwest Finance Association (MFA, 2023), Econometric Society Meetings (Asia, Europe, 2023),  Financial Management Association (FMA, 2022), UNSW Asset Pricing Workshop (2023), Money Macro and Finance Society (MMF, 2022), Southwestern Finance Association (SWFA, 2022), Midwest Economics Association (MEA, 2022), UW Madison Finance Brownbag (2021)

Doctoral Conferences, Seminars and Workshops: Junior Academic Research Seminar in Finance (JARS, 2023), LBS Trans-Atlantic Doctoral Conference (TADC, 2023), WashU Economics Graduate Student Conference (EGSC, 2023), American Finance Association PhD Poster Session (AFA, 2022), 19th Macro-Finance Society Workshop PhD Poster Session (MFS, 2022), Inter-Finance PhD Seminar (IFPHD, 2021-2023)

AbstractThe United States (US) is a relatively safe country: her global consumption and wealth shares are countercyclical. These findings are hard to square with the traditional view that the US is the global insurance provider. Given this challenge, I build a quantitative general equilibrium model where the US assumes the exact opposite role. At the heart of this twist is a fiscal asymmetry: the US runs more countercyclical fiscal policy than other countries. Taking this as given the US emerges as the global insurance receiver, enabling my model to rationalise many key features of the modern global financial system. Key model predictions are empirically verified. Thus US fiscal policy has global ramifications: it amplifies global fluctuations by driving up global sources of risk. This novel insight contrasts with the traditional view that increasing dollar debt during times of global stress provides global safety benefits.

 

2. Global Footprint of US Fiscal Policy (Solo) [Media][Latest Version] [SSRN] [Conference Slides] [Seminar Slides]

Awards and Grants: i) Western Finance Association (WFA) Brattle Group PhD Candidate Award for Outstanding Research (2023

                                ii) Financial Management Association (FMA) Best Paper in Investments, Winner (2023)

                                iii) Asian Meeting of the Econometric Society (AMES) Young Scholars’ Fund (YSF) Award for Outstanding Research (2023)

                                iv) Becker-Friedman Institute Macro-Finance Research Program (BFI-MFR) PhD Travel Grant (2022)

External Conference, Seminars and Workshops: Western Finance Association (WFA, 2023), Financial Intermediation Research Society (FIRS, 2023), Midwest Finance Association (MFA, 2024),  Texas A&M Young Finance Scholars Consortium (YFSC, 2024), Econometric Society Meetings (Asia, Australasia, 2023), European Economic Association (2023), Financial Management Association (FMA, 2023), Money Macro and Finance Society (MMF, 2023), Australasian Finance and Banking Conference (AFBC, 2022), Southern Finance Association (SFA, 2022), Insightful Minds in International Macro Seminar Series (IMIM, 2023)

Doctoral Conference, Seminars and Workshops: USC Marshall Finance PhD Conference in Finance (2023), John Hopkins Carey Finance Conference PhD Poster Session (Invited, 2023), WashU Economics Graduate Student Conference (EGSC, 2022), World Finance Conference (WFC, 2022), BFI Macro-Finance Research Program Summer Session for Young Scholars (MFR, 2022), LBS Trans-Atlantic Doctoral Conference (TADC, 2022), Inter-Finance PhD Seminar (IFPHD, 2021-2023), PhD Economics Virtual Seminar (EVS, 2023)

Abstract: Like US monetary policy, US fiscal policy has a global footprint: deteriorations in the US fiscal condition i) coincide with depressed global risky asset prices and ii) predict higher future global equity returns moving forward. These results are not spanned by i) the US monetary policy, ii) other fiscal variables or iii) local or global business cycles. To explain these results, I advance a novel fiscal mechanism that emphasises the special US role as the global innovation leader. This empowers the US fiscal policy with a large international transmission across the global innovation network, enabling it to influence i) foreign growth, ii) foreign fiscal conditions, iii) foreign policy uncertainty and consequently iv) global risk-premia. I propose a multi-country general equilibrium model to formalise this argument.

Media: Faculti Interview

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Other working Papers (Co-Authored)

3. Follow or Fight the Fed? Quantifying Monetary Policy Tradeoffs in Small Open Economies, with Patrick Adams

Abstract: U.S. monetary policy shocks have large effects on risky asset prices and exchange rates across many countries. To what extent can foreign central banks offset these effects by adjusting their own monetary policy stance? We investigate this question empirically, using a new dataset of high-frequency monetary policy shocks for G10 countries and the methodology of McKay and Wolf (2023), to estimate the effects of U.S. monetary policy shocks under counterfactual foreign policy responses. Our estimates imply that after a surprise U.S. monetary tightening, the average foreign country could offset the depreciation of its currency against the dollar by persistently increasing its own policy rate, or alternatively offsetting the decline in local stock prices by decreasing their own policy rate. These estimates imply that foreign policymakers face significant tradeoffs when attempting to simultaneously stabilize policy rates, asset prices, and exchange rates in response to U.S. monetary policy decisions.

Conference and Seminar Presentations: 22nd Macro-Finance Society (MFS) Workshop (2023)*, NW Kellogg Finance Brownbag, MIT Econ Brownbag*, MIT Sloan Finance Brownbag*, Inter-Finance PhD Seminar*

*=co-author presentation

4. Long Run Risks in FX Markets: Are They There?  [Paper] [Slides], with Konark Saxena

We uncover a tight relation between long run consumption risks (LRRs), currency risk premia and global currency risk factors. Countries that suffer a bad relative LRR shock experience a decline in their currency risk premium: their currencies appreciate initially before subsequently depreciating to deliver lower expected returns. Furthermore the High-Minus-Low (HML) carry trade sorted on interest rate differentials and the HML dollar beta portfolio sorted on conditional dollar exposures are highly correlated with global and US LRRs respectively. Finally US LRRs are a unique source of global risk driving the global exchange rate factor structure, a novel insight that has received surprisingly little emphasis thus far. An international LRR model where US and global LRRs constitute two distinct sources of global risk quantitatively accounts for these empirical findings.

Conference and Seminar Presentations: Financial Intermediation Research Society (FIRS, 2022), New Zealand Finance Meeting (NZFM, 2022), NW Kellogg Finance Brownbag (x2), Inter-Finance PhD Seminar (x2)

5. Why Do Sovereigns Borrow in Dollar? Convenience Yields and the Re-Emergence of Original Sin, with Nan He

Abstract: We uncover several empirical facts regarding the cyclical properties of dollarisation in emerging market (EME) countries. During times of global stress when the dollar premium is high, EME sovereigns increase their dollar borrowing share whereas the corporate sector lowers their dollar borrowing shares. This dichotomy is largely driven by the EME non-financial corporate sectors. These results are unique to EME countries and are far more pronounced for EME countries whose corporate sector has a higher degree of currency mismatch on their corporate balance sheets. We interpret these empirical findings as the result of risk-sharing between EME sovereign and corporate sectors. Rises in the dollar premium lower the relative cost of dollar debt vis-a-vis local currency debt, making it optimal for EME sovereigns to insure the corporate sector by borrowing more dollar debt during times of global stress. Conversely, binding financial frictions force EME corporates to retreat from dollar funding markets during these global episodes.

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Other working Papers (Solo)

6. Post-Brexit Britain: A Recursive Perspective (Solo) (Draft Available Soon)

AbstractThis paper studies the post-Brexit behaviour of UK international asset prices. This period has been characterised by i) consistent underperformance of UK equities vis-a-vis the rest of the world (ROW) and ii) sustained sterling depreciation against the ROW. These two facts are linked: the underperformance of the UK stock market during this period is entirely driven by the sterling depreciation as opposed to local equity return fluctuations orthogonal to the exchange rate. I interpret these novel stylised facts through the lens of an international long-run risk (LRR) model where Epstein-Zin (EZ) agents share expected growth risks with each other. Interpreting Brexit as a negative expected growth shock, the ROW insures the UK by shifting global consumption resources to the UK in the aftermath of Brexit. This lowers the currency risk premium for a global investor going long the pound against a basket of foreign currencies, causing i) sterling to depreciate over the long run and ii) the UK stock market to underperform the ROW during the post-Brexit period. UK trade data empirically validates the operation of this recursive risk-sharing scheme during and after Brexit.

7. US Multinational Production and the Global Financial Cycle (Solo) (Draft Available Soon)

Abstract: This paper explores the important role that US multinationals play in the international transmission of US fiscal shocks. Large US multinationals play an integral role in the global economy, featuring prominently in the national production and trade flows for non-US countries due to global value chains. Thus heightened future tax uncertainty associated with the accumulation of US government debt can distort the global R\&D investment incentives of US multinationals, depressing global innovation and expected future global growth. If preferences are recursive, this variation in global growth uncertainty maps directly into higher global risk premia, rationalising the strong negative link between the US fiscal condition and future global equity returns observed in the data. I formalise this mechanism by studying the international transmission of US fiscal shocks inside a multi-country general equilibrium model with multinational production.

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Works in progress

1. US Fiscal Capacity, Global Growth Expectations and Sovereign Default Spreads (Solo)

2. Fiscal Cyclicality and the End of US Exorbitant Privilege (Solo)

3. Leverage Contagion, with Pedro Tremacoldi-Rossi

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Service

Organiser

1.  Inter-Finance PhD Seminar (2021-)

2.  Kellogg Finance Reading Group (2021)

Conference Discussions

1. Sovereign Credit Risk, Monetary Policy, and the Role of Financial Intermediaries 

by Ram Yamarthy, Johannes Poeschl & Ivan Shaliastovich, 2023 Financial Management Association (FMA)

2. The Growth Effect of Uncertainty about Globalization: Evidence from the Option Market

by Mobina Shafaati & Mengying Wang, 2023 Financial Management Association (FMA)

3. Present Bias Amplifies Household Balance Sheet Channels of Macroeconomic Policy

by David Laibson (Harvard), Peter Maxted (Berkeley) and Benjamin Moll (LSE), 2022 Financial Management Association (FMA) Asia

4. Firm Foreign Activity and Exchange Rate Risk 

by Amir Akbrar (Mcmaster University), Francesca Carrieri (McGill University), 2022 Southern Finance Association (SFA)

5. Technology Diffusion and Currency Risk Premia

by  Siming Liu (SUFE),Ilias Filippou (Wash U Olin), Min Cui (Oklahoma Price), 2022 Financial Management Association (FMA)

6. The Corporate Bond Risk Premium: New Data and Evidence from The Origin of Corporate Default

by  Kevin Van Mencxel (University of Antwerp), 2022 World Finance Conference (WFC)

7. Caught in the Wind: Environmental Regulatory Intensity and the Cost of Capital

by Ashish Sahay (LBS), 2022 LBS Trans-Atlantic Doctoral Conference (TADC)

8. How does Firm Size impact Minority Representation in the C-Suite?

by Stephanie Yates (Alabama), 2022 Southwestern Finance Association (SWFA) Annual Conference

9. Feasibility, Desirability and Stability of Currency Unions

by Jinny Chen (National Central University, Taiwan), 2022 Midwest Economics Association (MEA) Annual Conference

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