Gongpil Choi - Academia.edu (original) (raw)

Papers by Gongpil Choi

Social Science Research Network, Dec 4, 2013

The heated debates over the QE tapering and the Fed government shutdown in the US suggest that th... more The heated debates over the QE tapering and the Fed government shutdown in the US suggest that there will be many obstacles on the path to the global economic recovery. In particular, uncertainties over the timing of the QE tapering might set off a financial market tsunami with turbulent capital flows and exchange rate fluctuations to hurt the Asian economy. Most Asian countries have open, export-driven economies, and stable exchange rates and FX reserves have been critical for their growth. For this reason, Asian countries spend considerable sum of money to maintain huge FX reserves. However, their investment portfolio has been heavily biased toward US Treasury bonds and real estates, with limited supply of regionally available assets. As a result, Asian countries’ investment portfolio is exposed to the shocks that will come from the normalization of monetary policies. To address this, the most urgent task is to develop safe regional assets to fill the ever-widening gap between supply and demand for quality assets. Until now, exchange rate uncertainties have obstructed supply of quality assets within Asia despite their solid economic fundamentals. To turn this around, developing emerging market CDOs should be positively considered. At the same time, a regional institution should be set up to create a new currency, based upon which safe assets can be supplied. In the longer term, it would be advisable to issue Asia Blue Bond. This would be the most strategic move for Asian countries to alleviate overload on the current global financial system and complement the Bretton Wood system that is mired by the Triffin dilemma and a consequent difficulty in global liquidity supply.

Social Science Research Network, 2022

Social Science Research Network, 2019

Unlike the popular belief, digital transformation mainly gets stymied by legal and regulatory iss... more Unlike the popular belief, digital transformation mainly gets stymied by legal and regulatory issues related with legacy institutions in Asia rather than technical difficulties. The real challenges triggered by the PSD2 (Payment Services Directive 2) are how the region would overcome the overly fragmented, centralized, and hierarchical legacy framework to allow necessary changes to respond to the digital single market initiatives as promulgated by the European counterpart. The PSD2 is expected to bring about substantial changes in the payment ecosystem by allowing payment service providers to access customers’ accounts and transactions information via API that have been traditionally controlled by banks. This paper suggests an incentive-compatible mechanism design for open collaboration among legacy institutions in the region to help them adapt to the PSD2. As evidenced by case studies in Korea, the Asian equivalent of PSD2 can be implemented and further expanded to create region-wide PCS (payment-clearing-settlement) network by reconnecting the dots of legacy infrastructures. These decentralized, diverse, small payment networks can be further combined with the expanded RTGS-CDS platform to evolve into the next phase of Asian Financial Network.

Social Science Research Network, 2017

Despite the efforts by regulatory authorities to promote the Fintech start-ups in the heavily reg... more Despite the efforts by regulatory authorities to promote the Fintech start-ups in the heavily regulated cross-border remittance market, its development has been slow and sporadic. The lingering uncertainty stems from a combination of factors: silo-type legacy infrastructures for regulatory oversight, the nascent global guidelines on the use of virtual currencies, and lack of relevant compliance services for start-ups. This paper highlights the glaring gap in regulatory arbitrage between the use of sovereign fiat currency and its digital counterpart for the cross-border value transfer. Developing a balanced ecosystem via relevant legal, supervisory, and regulatory support should be prioritized before situation-driven, fragmented and duplicate regulations are introduced.

Social Science Research Network, 2018

Even with the sizable Foreign Exchange (FX) holdings and good credit ratings of its top assets, A... more Even with the sizable Foreign Exchange (FX) holdings and good credit ratings of its top assets, Asia remains vulnerable to various shocks. This paper highlights the limited crossborder asset pledgeability as a significant factor for the lingering vulnerability in Asia. The dichotomy in asset holdings between pledgeable FX and non-pledgeable domestic assets in major economies in Asia has been the source of increasing stabilization costs as well as weakened market momentum in the region. Specifically, the peculiar feature of asset holdings in Asia reflects seriously deficient cross-border asset pledgeability that is left unaddressed. Asset pledgeability contributes toward financial stability via three channels: 1) capital market development by recognizing the role of collateral, 2) increased shock absorption capacity via collateral management, 3) and the newly activated safe asset provision. Therefore, it is crucial to go beyond the usual market development strategy and expand the overall asset pledgeability in the region that has remained unduly depressed.

SSRN Electronic Journal, 2014

ABSTRACT In the wake of the Asian crisis in 1997, policy efforts have been largely devoted to ins... more ABSTRACT In the wake of the Asian crisis in 1997, policy efforts have been largely devoted to installing various safety devices in the region, e.g. FX reserves and other swap arrangements of CMIM and extra backup with IMF liquidity facilities. Despite comprehensive progresses in regional monetary cooperation, they have proven less than effective in securing financial stability in the region as witnessed by the global financial crisis in 2008. Given the newly raised insurance motives in the region after the GFC, we have been looking for the underlying causes of volatile liquidity situation to seek better ways to enhance regional financial stability. This paper finds that the missing link in previous efforts has been the lack of valid reserve assets. Excess reliance on dollar assets in the form of increased FX reserves has revealed many problems. Going forward, a viable remedy would be a provision of a new reserve asset that represents the growing role of Asia. Introducing a new category of reserve assets in the international monetary system would not only complement the current monetary cooperation in the region but also enhance the global financial stability. This is because of its usefulness to alleviate the excess dollar dominance as a sole reserve currency and its eroding confidence due to tectonic changes in economic landscape. Without addressing the issue, even the best efforts in monetary and financial cooperation would not help ensure stability in the region and the world as repeatedly dictated by the reality. Specifically, introduction of ACU-type of reserve assets would serve to narrow the widening gap between demand and supply of safe financial assets. It would contribute to normalizing cross-border capital flows and sustaining stability of the existing reserve assets. Regional monetary and financial cooperation need to be predicated on this crucial effort to make sustained improvements in global rebalancing and moderate cross-border capital flows for global financial stability. Future efforts in regional monetary cooperation need to take this into account to realize the potential for supplying a new regionally-based reserve asset to remain time-consistent.

ERN: Open Macroeconomics in Emerging Markets (Topic), 2011

The current global debacle is first a consequence of an international financial system wobble tha... more The current global debacle is first a consequence of an international financial system wobble that triggered a rush into the US dollar from a lack of reserve assets in spite of the rise of Asian economies throughout. Second, capital retraced globally and real estate bubbles burst everywhere following the move into dollar assets and away from the large investment bank-led securitizations and leveraged investments that had become the norm. Third, the FED's USD3.0 trillion plus attempt to bailout global investment banks in 2008 and the repeated quantitative easings that followed violated market principles and was a direct cause for the crisis the world over. The resultant present predicament can be taken to be a deleveraging process brought on by the demand for diversified reserve assets outstripping those of dollar assets. With confidence now ebbing in the all-important dollar system, the spectrum of potential policy choices has greatly narrowed. In an environment where preserving...

A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Eco... more A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Economic Crisis of 1997 are seen as conflicting but consistent indicators of the fundamental weakness still existent in Korea’s financial markets. Drastic changes in firms ' financing strategy, volatile capital movements, and loose financial supervision are some of the examples of inappropriately applied macro measures to a market not yet fully normalized. Given the important role a robust financial sector plays in a developing economy and the limited role of the banking sector in bringing forth a mature market, the missing link for engendering economic efficiency and financial stability in Korea is seen as the absence of a long-term capital market. Heavier reliance on poorly supervised capital markets in the wake of the crisis exaggerated the business cycle and caused a sense of complacency that thwarted institutional reform. As the overall financial market anomalies found posterior t...

ERN: Regulation & Supervision (Topic), 2012

Korean Abstract: 본 연구에서는 해외유동성의 확보를 위해 외부금융 시스템에 전적으로 의존하고 있는 신흥시장의 입장에서 최근 논의... more Korean Abstract: 본 연구에서는 해외유동성의 확보를 위해 외부금융 시스템에 전적으로 의존하고 있는 신흥시장의 입장에서 최근 논의되고 있는 SIFI선정의 의미를 살펴보고 우리나라에서의 적용 시 예상되는 문제점과 더불어 금융시장에 미치는 영향을 분석하였다. 구체적으로 병행적인 시스템 위험지표와 Corisk 분위회귀 및 DD 행렬에 기초한 우리나라 금융권 전반의 SIFI관련 분석 결과 금융시장의 상황에 따라 SIFI분류의 강건성이 크게 저하됨을 확인하였다. 무엇보다도 자체적인 시장안정 여건이 구비되지 않은 신흥시장의 여건하에서 공동대응과 시장개입에 대한 높은 의존도는 개별차원의 위험 식별과 대응을 어렵게 한다. 따라서 시스템 위험관리를 위한 개별회사 차원의 건전성 감독을 구체화 하는데 있어 각별한 주의가 필요하다. 시스템 위험관리를 위한 SIFI식별과 미시적 차원의 대응에 앞서 시장인프라 확충 및 위험관리 전담기구 등의 설립을 통해 보다 명확한 위험생성 과정과 책임소재 파악이 가능한 여건부터 조성되어야 한다. English Abstract: In line with the international guidelines to identify national-SIFIs(N-SIFI), attempts have been made to come up with a significance ordering using the emerging market data and balance sheet information. Using various techniques on measuring tail-dependence, such as corisk, quantile regressions and distress dependence matrix, we measure individual contribution to changes in systemic risk as measured by a set of indicators developed earlier by Choi (2011). Classification results based on individual ranking suggest serious problems of identification, especially with respect to robustness. Given that some of the recent proposals for differential supervisory guidelines hinge on robust identification of N-SIFI, the results call into question the validity of pursuing such efforts in an emerging market context. Given the presence of common shock, largely related with FX-related funding needs, there are limits to single out individual contribution to systemic risks. The results suggest the needs to strengthen market frastructures for individual risk management before setting up a differential supervisory guidelines for recognizing endogenous externality.

Innovation Law & Policy eJournal, 2015

The Asian economy has been driven by exports for many decades, and cross-border coordination and ... more The Asian economy has been driven by exports for many decades, and cross-border coordination and cooperation has been scarce. Meanwhile, a platform economy is gaining traction where production factors come together to breed creative services and innovation within an intricately connected ecosystem. To establish a viable ecosystem, countries in the region should embrace the value of “openness and collaboration,�? by nurturing an open-minded attitude, forming social and human capital, and expanding network in the region. Also, greater investment should be made in developing human resources, software, and improving legal framework and legacy regulation, in addition to educational and financial reforms. The AIIB can play a pivotal role in these efforts and facilitate a growth paradigm shift in Asia. The AIIB can unleash a floodgate of new opportunities for Korea’s ICT and fintech companies to build high-tech open platforms and create lucrative markets, backed by the government’s commitm...

SSRN Electronic Journal

The post-global financial crisis highlighted the importance of engaging in collateralized securit... more The post-global financial crisis highlighted the importance of engaging in collateralized securities financing to meet the ever-increasing market needs for liquidity and risk management. Given the heavy reliance on volatile Eurodollar system and the fragmented governance and limited cross-border usability of the collateral among ASEAN+3 countries, it is important to relax prevailing constraints on collateral and mobilize cross-border transactions. To address the imperatives for securing collateral-based cross-border financial markets in the region, Asia needs the initiatives of central banks to develop a regional collateral framework for better financial plumbing. By collaborating on common grounds for cross-border collateral utilization, some of the prevailing constraints on collateral use can be relaxed. The inclusive collateral framework that incorporates CBCA (Central Bank Collateral Arrangement) would provide strong initial market support for the ABMI, thus help achieve sustainable financial stability.

Korea and the World Economy, 2003

A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Eco... more A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Economic Crisis of 1997 are seen as conflicting but consistent indicators of the fundamental weakness still existent in Korea's financial markets. Drastic change sin firms' financing strategy, volatile capital movements, and loose financial supervision are some of the examples of in appropriately applied macro measures to a market not yet fully normalized. Given the important role a robust financial sector plays in a developing economy and the limited role of the banking sector in bringing forth a mature market, the missing link for engendering economic efficiency and financial stability in Korea is seen as the absence of a long-term capital market. Heavier reliance on poorly supervised capital markets in the wake of the crisis exaggerated the business cycle and caused a sense of complacency that thwarted institutional reform. As the overall financial market anomalies found posterio...

ERN: Monetary & Fiscal Policies in Emerging Markets (Topic), 2012

In Korea, growing household debts are threatening to precipitate a balance sheet recession that i... more In Korea, growing household debts are threatening to precipitate a balance sheet recession that is hard to address with macroeconomic policies, similar to what transpired in Japan. The household debt-to-GDP ratio climbed to a significantly high level, and the debt structure is vulnerable to both external and internal shocks. Combined with deleveraging efforts around the world, the current situation would be hard to fix with market-led adjustment. Moreover, 80% of private-sector assets are held in property market, and stimulating consumption through asset liquidation might result in a sharp fall of asset prices, system-wide financial distress, and possibly a long-term recession. In case asset prices plummet, it will severely hit asset owners, strengthen a negative feedback, and cause a system-wide implosion to worsen asset polarization, which could be more damaging than income divide. With limited means to address the current situation, the best course of action would be implementing...

Social Science Research Network, Dec 4, 2013

Social Science Research Network, 2022

Social Science Research Network, 2019

Social Science Research Network, 2017

Social Science Research Network, 2018

SSRN Electronic Journal, 2014

ERN: Open Macroeconomics in Emerging Markets (Topic), 2011

ERN: Regulation & Supervision (Topic), 2012

Innovation Law & Policy eJournal, 2015

SSRN Electronic Journal

Korea and the World Economy, 2003

A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Eco... more A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Economic Crisis of 1997 are seen as conflicting but consistent indicators of the fundamental weakness still existent in Korea's financial markets. Drastic change sin firms' financing strategy, volatile capital movements, and loose financial supervision are some of the examples of in appropriately applied macro measures to a market not yet fully normalized. Given the important role a robust financial sector plays in a developing economy and the limited role of the banking sector in bringing forth a mature market, the missing link for engendering economic efficiency and financial stability in Korea is seen as the absence of a long-term capital market. Heavier reliance on poorly supervised capital markets in the wake of the crisis exaggerated the business cycle and caused a sense of complacency that thwarted institutional reform. As the overall financial market anomalies found posterio...

ERN: Monetary & Fiscal Policies in Emerging Markets (Topic), 2012