A traditional diagnostic treats a breakdown of price-rent cointegration as definitive proof of a speculative housing bubble. Using a Markov-switching error-correction model, this paper reassesses that assumption in Seoul's housing market. We uncover two distinct regimes: one exhibiting a stable, mean-reverting price-rent ratio implied by present-value theory, and another governed by a non-linear relationship between prices and rents. Crucially, the second regime occupies a gray zone for standard tests - where prices deviate from a stable ratio yet remain anchored to rents. As standard monetary policy channels weaken in this regime, regime-sensitive macroprudential tools are warranted.
This study investigates the effects of four Middle East-related geopolitical events during 2023-2025 on returns across eleven Korean stock-market sectors using a market-model event study. Sector responses are heterogeneous: Transportation and Storage records significant losses, Steel exhibits significant gains following repeated shocks, and Defence consistently displays positive cumulative abnormal returns (CARs). Aggregate reactions shift from negative around the first shock to positive as similar shocks recur, consistent with adaptive learning and experience-based learning. Effects are most pronounced immediately prior to the event day. Results are robust to alternative windows, Adj-BMP corrections, multifactor models, bootstrap inference, and winsorisation.
The 2018 US-China trade war raised trade policy uncertainty (TPU) and triggered a prolonged US downturn, but China's experience remains unclear. We construct a novel provincial TPU indicator combining sectoral tariff volatility with provincial import composition, using data from 2015-2024. Surprisingly, provinces more exposed to tariff volatility shocks show above-average real GDP growth in the first year, driven mainly by machinery and electrical products, but experience sharply negative GDP, employment, and wage growth thereafter. These findings remain robust across alternative specifications, and high- versus low- TPU provinces respond differently. We propose a concise theoretical explanation for this two-stage response.
This paper investigates how local economic policy uncertainty (EPU) influences entrepreneurial entry. Higher local EPU significantly reduces new firm formation, a result robust to multiple strategies addressing endogeneity, including coefficient-stability analysis, robustness-of-inference-to-replacement, double machine learning, and two-stage least squares. Evidence supports four mechanisms: real-options effects, information frictions, financing constraints, and reduced local demand. EPU also disproportionately reduces entry by firms with female legal representatives and lowers the industrial diversity of entrepreneurship. Among realised entrants, the decline is concentrated among lower-capital registrations, suggesting compositional selection.
