Effects of Easing LTV·DTI Regulations on the Debt Structure and Credit Risk of Borrowers / Meeroo Kim and Yoon Hae Oh

With CB data in South Korea, this study examines whether the credit risk of borrowers changes when the regulation on bank mortgage supply is relaxed. We analyze the effect of deregulation on LTV and DTI limits in the Seoul-metropolitan area in August 2014 with a difference-in-difference approach. We find that the probability of delinquency is lower in the Seoul metropolitan area after the deregulation than in other urban areas. The effect is noticeable among low-income and low-credit borrowers. We also find that borrowers change their debt structure to reduce the interest costs utilizing their improved access to bank mortgages. The findings suggest the necessity to consider the burden of the high interest costs of unsecured loans for debtors with low incomes and low credit ratings in designing housing finance regulations.

Measuring the Degree of Integration into the Global Production Network by the Decomposition of Gross Output and Imports: Korea 1970-2018 / Dongseok Kim

The import content of exports (ICE) is defined as the amount of foreign input embodied in one unit of export, and it has been used as a measure of the degree of integration into the global production network. In this paper, we suggest an alternative measure based on the decomposition of gross output and imports into the contributions of final demand terms. This measure considers the manner in which a country manages its domestic production base (gross output) and utilizes the foreign sector (imports) simultaneously and can thus be regarded as a more comprehensive measure than ICE. Korea’s input-output tables in 1970-2018 are used in this paper. These tables were rearranged according to the same 26-industry classification so that these measures can be computed with time-series continuity and so that the results can be interpreted clearly. The results obtained in this paper are based on extended time-series data and are expected to be reliable and robust. The suggested indicators were applied to these tables, and, based on the results we conclude that the overall importance of the global economy in Korea’s economic strategy has risen and that the degree of Korea’s integration into the global production network increased over the entire period. This paper also shows that ICE incorrectly measures the movement of the degree of integration into the global production network in some periods.

An Unsuccessful Reform on the Local Public Contracts Law in Korea / Sunjoo Hwang

In Korea, local governments and local agencies had to apply a version of the first price auction augmented by an ex-post screening process when they procure construction contracts. However, this first price auction had been criticized because it was felt that too much price competition could lead to poor ex-post performance in construction. In response, the existing auction method was recently replaced by a version of the average price auction with a similar screening process. This paper empirically examines the effectiveness of this reform and finds that the replacement only increases the fiscal burden of local governmental bodies without making any improvement in the ex-post performance.

Effects of Easing LTV·DTI Regulations on the Debt Structure and Credit Risk of Borrowers / Meeroo Kim and Yoon Hae Oh
　I. Introduction
　II. Review of LTV·DTI in the Literature
　III. Data and Empirical Strategy
　IV. Empirical Results
　V. Conclusion
　APPENDIX
　REFERENCES

Measuring the Degree of Integration into the Global Production Network by the Decomposition of Gross Output and Imports: Korea 1970-2018 / Dongseok Kim
　I. Introduction
　II. Motivation and Literature
　III. Methodology and Data
　IV. Results
　V. Conclusion
　REFERENCES

An Unsuccessful Reform on the Local Public Contracts Law in Korea / Sunjoo Hwang
　I. Introduction
　II. Institutional Background
　III. Theory Overview and Hypothesis Formulation
　IV. Empirical Analysis: Price Performance
　V. Empirical Analysis: Ex-Post Performance
　VI. Empirical Analysis: Simple Regression
　VII. Conclusion and Policy Implications
　REFERENCES