Search Results (5)

In the aftermath of the COVID-19 pandemic, the dramatic increase in maritime transport costs might potentially exert detrimental impacts on the macroeconomy, especially for countries that heavily rely on international trade for their consumption and production activities. Our study employs a small open economy DSGE (Dynamic Stochastic General Equilibrium) model to analyze the impact of maritime transport costs on the South Korean macroeconomy, where maritime transport costs are considered as key factors impacting the law of one price. Positive shocks in maritime transport costs, according to the impulse response function, have positive repercussions on the Consumer Price Index (CPI), terms of trade, nominal exchange rates, and nominal interest rates, but can negatively affect real output and real exchange rate. To verify the validity of the our DSGE model, we utilize a Vector autoregression with exogenous variables (VARX) model to examine the dynamic relationship between maritime transport costs and South Korean macroeconomic variables, based on quarterly data from the first quarter of 2002 to the fourth quarter of 2022. The results of the VARX model coincide with those of the DSGE model. Our findings underline the importance of maritime transport costs in the macroeconomy and hold substantial implications for the considered design and selection of policies to mitigate such shocks. Full article

Under the double pressure of the Ukrainian–Russian war and the COVID-19 pandemic, the global energy crisis has also engulfed the Korean economy. Based on this context, this article examines the macroeconomic implications of energy prices, using Korea as an example. According to an empirical study using the impulse response function, the results show that an energy price shock causes a decline in production, labor supply, capital stock, and energy consumption, as well as an increase in consumption, wages, the goods price level, inflation, and the deposit interest rate. Meanwhile, variance decomposition findings indicate that the energy price shock has a greater impact on the Korean macroeconomy than other shocks. In addition, the findings of three types of robustness tests validate the reliability and accuracy of the conclusions reached in this work. In conclusion, the information presented in this study may aid Korean policymakers in implementing appropriate countermeasures against macroeconomic volatility caused by the energy price shock. Full article

The COVID-19 pandemic has had a tremendous influence on many aspects of life in Korea. Some people have had to relocate their workplaces from factories or offices to their homes in order to stop the spread of the virus. This paper examines the effects of home production on the Korean macroeconomy during the COVID-19 pandemic. Then, the impulse response function is used to perform an empirical analysis. The results show that total output, market goods consumption, investment, capital, and market work hours all decline as a consequence of a home productivity shock, while home goods consumption, wages, transfer payments, and home work hours all increase. Moreover, using fiscal policies such as lowering the capital tax rate and increasing the fiscal deficit, the effect of the COVID-19 pandemic on the Korean macroeconomy can be improved. Robustness tests are carried out in light of the uneven economic development and different COVID-19 pandemic scenarios inside and outside the Seoul circle. The conclusions of this paper are accurate and reliable, as shown by the results of the robustness test. Full article

Korea’s economy has suffered greatly as a result of the COVID-19 pandemic. Based on such a background, this paper investigates the macroeconomic effects of the COVID-19 pandemic. Via impulse response function analysis, the results reveal that the COVID-19 pandemic has a considerable short-term influence on Korea’s key macroeconomic variables, while its long-term effects are not significant. As a consequence of the COVID-19 pandemic, total demand in Korea has decreased. It is mostly reflected in the lower consumption and investment demand. Simultaneously, this has put increased pressure on inflation and unemployment. Moreover, the results also show that government investment expenditure and monetary policy may, to some degree, ameliorate the status of consumption demand. Meanwhile, they may alleviate employment pressures in order to boost output. In reality, both have some negative consequences. Based on the evidence presented in this article, the Korean government may implement appropriate policies to ensure the smooth functioning of the Korean macroeconomy. Full article

This study decomposed shocks of the global crude oil (GCO) market and Korean gasoline (KG) market into six types using the structural vector auto-regressive model. Breaking down the shocks into six, we analyzed how each shock affects the macroeconomy and gasoline market in Korea. Results of the analysis revealed that the oil supply shock did not cause a large fluctuation in gasoline prices, but it harmed the macroeconomy. By contrast, the two shocks on the demand side of the GCO market caused a large increase in domestic gasoline prices, but they did not negatively affect the macroeconomy. Meanwhile, in the KG market, gasoline-refining shock and gasoline demand shock caused a significant increase in gasoline prices. Both shocks had some negative effects on the Korean macroeconomy at a certain point, but the effects are not as strong as the oil supply shock. However, the gasoline distribution shock in Korea rarely caused negative consequences for major macroeconomic variables. Moreover, analyzing the KG prices through historical decomposition, we found that the two demand-side factors of the GCO market and the demand shock of the KG market have had the most important influence on the gasoline price since the 2000s. From the analysis, the increase in gasoline prices in Korea since the 2000s can be inferred to have no significant negative impact on the macroeconomy. Therefore, the essential factors of price fluctuations must be focused on in analyzing domestic gasoline price and their impact on the macroeconomy. Full article