Huiran Pan
Department of Economics
California State University-Fullerton

“International Portfolio Choice and Information Heterogeneity,”  coming soon.


“Valuation and Trade Adjustments under Liability Dollarization: Evidence from South Korea,” January 2008.     [Download paper]

        This paper investigates external adjustment via trade and asset revaluation under liability dollarization in South Korea. Recent research has found that asset revaluation is important for restoring external balance in the US but lacks decisive evidence from the intertemporal current account model. In contrast, this paper shows that asset valuation adjustment is positively correlated with trade adjustment in Korea. The exchange rate works through asset returns to increase the external disequilibrium, thereby calling for larger adjustments through trade. Furthermore, the empirical tests find favorable evidence for the intertemporal model of the current account, which potentially coincides with the substantial trade adjustment in Korea. Finally, external imbalances are found to help forecast exchange rates and portfolio returns at one-quarter and beyond, but most of the forecasting power arises from trade imbalances.

“Meese-Rogoff Redux: Financially-weighted Exchange Rate Forecasting,” June 2007.

     This paper re-examines the Meese-Rogoff puzzle using the financially-weighted exchange rate and information on the external imbalance and financial account. In particular, I focus on whether new information on the financial account would help predict exchange rates at short and long horizons and what would be the source of noise to disconnect exchange rates and economic fundamentals. It shows that information on the external imbalance cannot beat the random walk at horizon shorter than one quarter, but it plays a role in predicting exchange rate changes at longer horizons. The predictive power is mainly driven by the trade imbalance rather than the asset imbalance. These findings are consistent with limited asset valuation adjustment in South Korea that tends to operate at short horizons. Meanwhile, strong trade adjustment would help tie exchange rate changes to economic fundamentals in the long run.

“Measuring Korean International Portfolio Positions, Rates of Return, and Financially-weighted Exchange Rates,” February 2006.

       This project works to construct a data set for Korean international portfolio positions, rates of return, and financially weighted exchange rates at quarterly frequency since 1980. One contribution of this work is to construct portfolio positions at market value by interpolating end of year positions and including valuation changes arising from asset price and exchange rate movements. Another contribution is to distinguish four types of assets (direct investment, equity, debt and other investment) and their currency compositions. This distinction is particularly important for the analysis of international adjustment, because different assets pay different returns and are exposed to different exchange rate risks.