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Macroeconomic Impact of Oil Shocks: A Large-Scale Bayesian SVAR Approach in South Korea

Author

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  • Arsalane, Salima

    (Jeonbuk National University, Jeonju, Republic of Korea)

  • Kim, Young Min

    (Jeonbuk National University, Jeonju, Republic of Korea)

Abstract

This study employs a Large-Scale Bayesian Vector Autoregression (LS-BVAR) model to examine the impact of oil price shocks on South Korea's economy using monthly data spanning from January 2001 to September 2023. The analysis includes key macroeconomic variables such as industrial production, inflation, interest rates, money supply, exchange rates, imports, exports, and foreign direct investment (FDI) abroad. Our findings indicate that while oil supply shocks have limited effects on these variables, both oil aggregate demand shocks and oil-specific demand shocks significantly impact the Korean economy. The study's findings highlight the importance of leveraging global demand that could potentially boost the economic growth of the country.

Suggested Citation

  • Arsalane, Salima & Kim, Young Min, 2024. "Macroeconomic Impact of Oil Shocks: A Large-Scale Bayesian SVAR Approach in South Korea," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 39(4), pages 899-920.
    • Handle: RePEc:ris:integr:0927
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    More about this item

    Keywords

    Oil Shocks; Korean Economy; Structural VAR; Bayesian Estimation; Shrinkage Prior;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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