Nature of Oil Price Shocks and Monetary Policy
NBER Working Paper No. 15306
We investigate the nature of oil price shocks to the Korean economy in recent years and find that the recent hike in oil price is induced by the increase in oil demand in contrast to the previous years when oil price run-up is mostly from supply disruptions. We also study how monetary responses to oil price shocks affect economic stability and find that an accommodative policy yields more stable outcomes.