Nature of Oil Price Shocks and Monetary Policy
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.
We thank the participants in the 20th NBER EASE conference and Takatoshi Ito and Andrew Rose for helpful discussions and comments. Any remaining errors are ours. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.