2025

1. Aggregate Fluctuations from Firm Comovement

   Nahyeon Bak and Daisoon Kim

   R&R, Journal of Monetary Economics, 2025

   Abstract BibTex PDF

   This paper shows that correlated idiosyncratic fluctuations within industries are an important source of macroeconomic volatility. Standard methods, such as cross-sectional demeaning, obscure this channel by mechanically driving average pairwise correlations toward zero asymptotically. We develop a non-parametric bounds approach that quantifies the contribution of such clustered comovement directly from firm-level data. Applied to U.S. firms, we find that within-industry comovement explains 10–15% of GDP volatility in normal times, 15–30% in downturns, and up to 45% during the Great Recession, helping account for the Great Moderation. These findings highlight the importance of cross-firm interdependencies in business cycle fluctuations.

   @article{BakKim2025,
     title = {Aggregate Fluctuations from Firm Comovement},
     journal = {R\&R, Journal of Monetary Economics},
     year = {2025},
     author = {Bak, Nahyeon and Kim, Daisoon},
     keywords = {Business cycles, idiosyncratic comovements, pairwise correlation.}
   }

2026

1. Multinational Investment Activity under Policy Uncertainty in Host and Competing Countries

   Daisoon Kim and Sunhyung Lee

   Journal of International Economics, 2026

   Abstract Journal Link BibTex PDF (WP) Code

   This paper examines how economic policy uncertainty (EPU) in host and competing countries reshapes U.S. multinationals’ greenfield foreign direct investment (FDI). Using firm–destination level data from 2003 to 2021, we show that while host-country EPU deters investment, EPU in competing destinations attracts it through a spillover effect. We document a structural shift around 2015: as global EPU rose unevenly, the spillover effect from competitors became the dominant driver of investment decisions, supplanting the direct effect of host-country policy instability. Our findings indicate that in an era of heightened global uncertainty and risk, FDI allocation is governed by relative, not just absolute, policy stability.

   @article{KimLee2026,
     wppdf = {https://drive.google.com/file/d/17ez3UL9sCRMz30X8c75EkUpOfH-xXiWf/view?usp=drive_link},
     title = {Multinational Investment Activity under Policy Uncertainty in Host and Competing Countries},
     journal = {Journal of International Economics},
     volume = {161},
     pages = {104252},
     year = {2026},
     issn = {0022-1996},
     doi = {https://doi.org/10.1016/j.jinteco.2026.104252},
     url = {https://www.sciencedirect.com/science/article/pii/S0022199626000425},
     author = {Kim, Daisoon and Lee, Sunhyung},
     keywords = {Economic policy uncertainty, Greenfield foreign direct investment, Global value chains, Multinational firms, Offshoring}
   }

2025

1. International Trade and Macroeconomic Dynamics with Sanctions

   Fabio Ghironi, Daisoon Kim, and Galip Kemal Ozhan

   Journal of Monetary Economics, 2025

   Abstract Journal Link BibTex PDF (WP)

   We develop a framework combining dynamic, intertemporal choices of general-equilibrium macro models with microfoundations of modern trade theory to study sanctions. In a two-country, two-sector setup, Home holds a comparative advantage in producing differentiated consumption goods via heterogeneous firms with endogenous entry, while Foreign in homogeneous intermediate goods from a fixed number of firms. Sanctions include trade bans and financial restrictions excluding particular Foreign agents from markets. In our model, sanctions reallocate resources across and within countries, affecting production, exchange rates, and welfare, with larger welfare losses when targeting sectors of comparative disadvantage. Focusing only on long-run outcomes, overlooking initial dynamics, inaccurately assesses welfare impacts. Sanctions weaken international comovement and fragment markets but leave business cycles intact.

   @article{Ghironi_et_al2025JME,
     wppdf = {https://www.nber.org/papers/w32188},
     title = {International Trade and Macroeconomic Dynamics with Sanctions},
     journal = {Journal of Monetary Economics},
     volume = {154},
     pages = {103810},
     year = {2025},
     issn = {0304-3932},
     doi = {https://doi.org/10.1016/j.jmoneco.2025.103810},
     url = {https://www.sciencedirect.com/science/article/pii/S0304393225000819},
     author = {Ghironi, Fabio and Kim, Daisoon and Ozhan, Galip Kemal},
     keywords = {Business cycles, Exchange rate, Macroeconomic dynamics, Sanctions, Trade, Welfare}
   }

2022

1. Central Bank Policy and the Concentration of Risk: Empirical Estimates

   Nuno Coimbra, Daisoon Kim, and Hélène Rey

   Journal of Monetary Economics, 2022

   Abstract Journal Link BibTex PDF (WP) Appx Code

   Before the 2008 crisis, the cross-sectional skewness of banks’ leverage went up and macro risk concentrated in the balance sheets of large banks. Using a model of profit-maximizing banks with heterogeneous Value-at-Risk constraints, we extract the distribution of banks’ risk-taking parameters from balance sheet data. The time series of these estimates allow us to understand systemic risk and its concentration in the banking sector over time. Counterfactual exercises show that (1) monetary policymakers confront the trade-off between stimulating the economy and financial stability, and (2) macroprudential policies can be effective tools to increase financial stability.

   @article{Coimbra_et_al2022JME,
     wppdf = {https://www.nber.org/papers/w28907},
     title = {Central Bank Policy and the Concentration of Risk: Empirical Estimates},
     journal = {Journal of Monetary Economics},
     volume = {125},
     pages = {182-198},
     year = {2022},
     issn = {0304-3932},
     doi = {https://doi.org/10.1016/j.jmoneco.2021.08.002},
     url = {https://www.sciencedirect.com/science/article/pii/S0304393221000878},
     author = {Coimbra, Nuno and Kim, Daisoon and Rey, Hélène},
     keywords = {Bank regulation, Financial cycle, Leverage, Monetary policy, Risk-taking, Systemic risk}
   }

2021

1. Economies of Scale and International Business Cycles

   Daisoon Kim

   Journal of International Economics, 2021

   Abstract Journal Link BibTex PDF (WP) Appx Code

   This paper incorporates sloping marginal cost curves and their variations across industries into an open macro model, motivated by the fact that industries’ output, imports, and exports are more procyclical when their economies of scale arise from sloping marginal cost curves rather than fixed costs. The model, consistent with the data, delivers endogenous within-firm interdependence across markets and export gains/losses, which reproduce observed industrial business cycle patterns as well as more correlated aggregate business cycles across countries. The findings highlight the importance of marginal cost structures in international business cycle research.

   @article{Kim2021JIE,
     wppdf = {https://drive.google.com/file/d/1iMw9OWjh9flY9F0ykxSbi22nUEG4Q4zt/view?usp=sharing},
     title = {Economies of Scale and International Business Cycles},
     journal = {Journal of International Economics},
     volume = {131},
     pages = {103459},
     year = {2021},
     issn = {0022-1996},
     doi = {https://doi.org/10.1016/j.jinteco.2021.103459},
     url = {https://www.sciencedirect.com/science/article/pii/S0022199621000362},
     author = {Kim, Daisoon},
     keywords = {Economies of scale, International business cycle, Sloping marginal cost curve, Within-firm market interdependence}
   }