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Nature of Oil Price Shocks and Monetary Policy

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  • Junhee Lee
  • Joonhyuk Song

Abstract

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.

Suggested Citation

  • Junhee Lee & Joonhyuk Song, 2009. "Nature of Oil Price Shocks and Monetary Policy," NBER Working Papers 15306, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15306
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    References listed on IDEAS

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    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
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    Citations

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    Cited by:

    1. Cunado, Juncal & Jo, Soojin & Perez de Gracia, Fernando, 2015. "Macroeconomic impacts of oil price shocks in Asian economies," Energy Policy, Elsevier, vol. 86(C), pages 867-879.
    2. Juncal Cunado & Soojin Jo & Fernando Perez de Gracia, 2015. "Revisiting the Macroeconomic Impact of Oil Shocks in Asian Economies," Staff Working Papers 15-23, Bank of Canada.
    3. Junhee Lee & Joonhyuk Song, 2011. "Oil and Macroeconomy: The Case of Korea," NBER Chapters,in: Commodity Prices and Markets, East Asia Seminar on Economics, Volume 20, pages 263-290 National Bureau of Economic Research, Inc.
    4. Nicoletta Batini & Eugen Tereanu, 2010. "Inflation targeting during asset and commodity price booms," Oxford Review of Economic Policy, Oxford University Press, vol. 26(1), pages 15-35, Spring.
    5. Liu, Jing-Yu & Lin, Shih-Mo & Xia, Yan & Fan, Ying & Wu, Jie, 2015. "A financial CGE model analysis: Oil price shocks and monetary policy responses in China," Economic Modelling, Elsevier, vol. 51(C), pages 534-543.
    6. Birouke Tefera & Frehiwot Worku & Zewdu Ayalew, 2012. "Implications of Oil Price Shocks and Subsidizing Oil Prices to the Ethiopian Economy: A CGE Analysis," Working Papers 008, Ethiopian Development Research Institute.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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