Chon, So a
A icle
The mac oeconomic e ec s o s uc u al oil p ice shocks:
An in e na ional GVAR analysis
KDI Jou nal o Economic Policy
P o ided in Coope a ion wi h:
Ko ea De elopmen Ins i u e (KDI), Sejong
Sugges ed Ci a ion: Chon, So a (2025) : The mac oeconomic e ec s o s uc u al oil p ice shocks: An
in e na ional GVAR analysis, KDI Jou nal o Economic Policy, ISSN 2586-4130, Ko ea De elopmen
Ins i u e (KDI), Sejong, Vol. 47, Iss. 3, pp. 69-88,
h ps://doi.o g/10.23895/kdijep.2025.47.3.69
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/330703
S anda d-Nu zungsbedingungen:
Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen
Zwecken und zum P i a geb auch gespeiche und kopie we den.
Sie dü en die Dokumen e nich ü ö en liche ode komme zielle
Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich
machen, e eiben ode ande wei ig nu zen.
So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen
(insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en,
gel en abweichend on diesen Nu zungsbedingungen die in de do
genann en Lizenz gewäh en Nu zungs ech e.
Te ms o use:
Documen s in EconS o may be sa ed and copied o you pe sonal
and schola ly pu poses.
You a e no o copy documen s o public o comme cial pu poses, o
exhibi he documen s publicly, o make hem publicly a ailable on he
in e ne , o o dis ibu e o o he wise use he documen s in public.
I he documen s ha e been made a ailable unde an Open Con en
Licence (especially C ea i e Commons Licences), you may exe cise
u he usage igh s as speci ied in he indica ed licence.
h ps://c ea i ecommons.o g/licenses/by-sa/4.0/
KDI Jou nal o Economic Policy 2025, 47(3):69-88
h ps://dx.doi.o g/10.23895/kdijep.2025.47.3.69
69
The Mac oeconomic E ec s o S uc u al Oil P ice Shocks:
An In e na ional GVAR Analysis
†
By
S
ORA
C
HON
*
This pape in es iga es he mac oeconomic impac s o s uc u al oil
p ice shocks by employing a Global Vec o Au o eg ession (GVAR)
amewo k, u ilizing he s uc u al shocks as iden i ied by Baumeis e
and Hamil on (2019). Ou analysis di e en ia es among h ee ypes
o oil shocks: economic ac i i y shocks caused by luc ua ions in
global demand, oil supply shocks d i en by p oduc ion dis up ions,
and oil in en o y demand shocks linked o shi s in ma ke expec a ions
abou u u e supply-demand imbalances. Empi ical indings indica e
ha he mac oeconomic consequences o hese shocks di e depending
on hei unde lying sou ces and ela ed s uc u al cha ac e is ics.
In oil-impo ing coun ies such as Ko ea and China, oil supply
dis up ions and in en o y- ela ed shocks gene ally exe nega i e
sho - e m e ec s on economic ac i i y due o inc eased impo cos s and
unce ain y-d i en p ice ola ili y. Con e sely, oil-expo ing coun ies
such as Canada and he Uni ed S a es espond di e en ly, bene i ing
om inc eased expo oppo uni ies associa ed wi h highe oil p ices.
O e all, he s udy emphasizes he c i ical impo ance o dis inguishing
he s uc u al causes o oil p ice luc ua ions, highligh ing how he
indi ec ansmission o hese shocks h ough in e na ional economic
linkages signi ican ly in luences domes ic mac oeconomic pe o mance
ou comes. The esul s p o ide impo an implica ions o policymake s,
unde sco ing he necessi y o ailo ed policy esponses o mi iga e
mac oeconomic isks a ising om ene gy ansi ions and geopoli ical
unce ain ies.
Key wo ds: Ene gy and commodi y ma ke , Global VAR (GVAR),
S uc u al Oil Shock, Mac oeconomic impac
JEL Code: Q41, Q43, E32
* Assis an P o esso o Economics, Inha Uni e si y (E-mail: so[email p o ec ed])
* Recei ed: 2025. 2. 26
* Re e ee P ocess S a ed: 2025. 2. 27
* Re e ee Repo s Comple ed: 2025. 7. 31
† I since ely hank he wo anonymous e e ees o hei aluable commen s and sugges ions. Any emaining
e o s a e my own esponsibili y.
70 KDI Jou nal o Economic Policy Augus 2025
I. In oduc ion
nde s anding he mac oeconomic impac s o oil p ice luc ua ions has long
been an impo an esea ch opic, gi en he cen al ole o oil as a global ene gy
sou ce. In e es in his a ea has in ensi ied ecen ly due o heigh ened ola ili y and
dis up ions in global ene gy ma ke s ollowing he COVID-19 pandemic, ongoing
geopoli ical ensions, and shi s in in e na ional clima e policies. Rising ene gy
p ices and global commi men s owa d ca bon neu ali y ha e u he inc eased he
ele ance o oil p ice changes in ela ion o economic g ow h, in la ion, employmen ,
and o e all inancial s abili y.
P e ious s udies, no ably Kilian (2009), ha e clea ly demons a ed a s ong link
be ween oil p ices and mac oeconomic pe o mance, highligh ing signi ican
implica ions ac oss di e se economic con ex s. Coun ies ha a e hea ily elian on
impo ed ene gy esou ces, such as Ko ea, o en desc ibed as an ene gy island, a e
especially ulne able o global oil p ice luc ua ions. In such economies, oil p ice
ola ili y di ec ly a ec s in la ion, indus ial p oduc ion, employmen , consump ion,
and inancial s abili y, in ensi ying hei sensi i i y o ce ain de elopmen s in he
in e na ional ene gy ma ke .
His o ically, economic analyses o en ea ed oil p ice luc ua ions as ex e nal,
exogenous shocks. While his app oach cla i ied sho - e m economic e ec s, i
la gely o e looked he unde lying s uc u al ac o s d i ing such p ice changes. This
ype o simpli ica ion could lead o incomple e in e p e a ions and po en ially
ine ec i e policy ecommenda ions, especially du ing pe iods o heigh ened
unce ain y o complex global in e ac ions.
Mo e ecen s udies, pa icula ly Baumeis e and Hamil on (2019), emphasize he
impo ance o explici ly iden i ying he s uc u al ac o s behind oil p ice luc ua ions.
They dis inguish clea ly among economic ac i i y (demand) shocks, oil supply
shocks, and in en o y shocks d i en by ma ke expec a ions. In en o y shocks,
which in ol e ma ke pa icipan s adjus ing cu en in en o ies based on expec ed
u u e supply-demand imbalances, signi ican ly in luence sho - e m p ice ola ili y.
Clea ly iden i ying hese s uc u al shocks enables policymake s o mo e accu a ely
unde s and he economic implica ions o oil p ice mo emen s, esul ing in mo e
e ec i e policy esponses.
Addi ionally, con empo a y clima e policies and ca bon neu ali y ini ia i es
in oduce u he complexi y in o global oil ma ke s. As coun ies ansi ion owa d
low-ca bon ene gy sys ems, expec a ions abou u u e ossil uel demand change
subs an ially. Such expec a ions can in luence cu en oil p ices h ough in en o y
adjus men s and in es men decisions, unde sco ing he need o mo e s uc u al
analysis.
Building on he amewo ks es ablished by Kilian (2009) and Baumeis e and
Hamil on (2019), his s udy con ibu es o he exis ing li e a u e by examining
s uc u al oil p ice shocks wi hin an open economy con ex . While p io esea ch
ex ensi ely explo ed domes ic impac s, i has a ely conduc ed de ailed compa a i e
analyses ac oss bo h oil-impo ing and oil-expo ing coun ies. To add ess his gap,
we apply a global ec o au o eg ession (GVAR) model, in eg a ing in e na ional
economic in e dependence explici ly. We hen analyze mac oeconomic esponses o
U
VOL. 47 NO. 3 The Mac oeconomic E ec s o S uc u al Oil P ice Shocks: An In e na ional GVAR Analysis 71
dis inc s uc u al oil shocks ac oss selec ed majo economies—Ko ea, China,
Canada, and he Uni ed S a es.
Ou empi ical esul s indica e ha mac oeconomic esponses di e signi ican ly
depending on he ype o s uc u al shock conside ed. Oil-impo ing economies such
as Ko ea and China ace ad e se sho - e m e ec s om oil supply dis up ions and
in en o y shocks due o inc eased impo cos s and ma ke unce ain y. Con e sely,
oil-expo ing economies such as Canada and he Uni ed S a es can bene i subs an ially
om supply-d i en oil p ice inc eases, as highe p ices incen i ize inc eased
domes ic p oduc ion and expo s (Cashin e al., 2014; Kilian, 2009. These
di e ences unde sco e he limi a ions o ea ing oil shocks me ely as sho - e m
inpu -cos luc ua ions and ein o ce he impo ance o iden i ying hei s uc u al
o igins.
O e all, ou s udy p o ides impo an insigh s o policymake s. A clea unde s anding
o s uc u al shocks is essen ial o e ec i e mac oeconomic managemen . Tailo ed
policy measu es ha e lec he dis inc cha ac e is ics o each ype o shock can help
mi iga e economic isks, enhance esilience. Mo eo e , hey espond e ec i ely o
ongoing geopoli ical unce ain y, ene gy ma ke ola ili y, and e ol ing clima e
policies.
The emainde o his pape is s uc u ed as ollows. Sec ion 2 ho oughly e iews
ele an p io esea ch, highligh ing key indings, me hodological ad ances, and
iden i ying exis ing gaps. Sec ion 3 de ails ou empi ical model and me hodological
app oach, explici ly ou lining he GVAR amewo k and he s uc u al shocks
iden i ica ion s a egy employed. Sec ion 4 p esen s comp ehensi e empi ical esul s,
analyzing coun y-speci ic esponses o dis inc s uc u al oil shocks. Finally, Sec ion
5 summa izes he s udy’s main indings, discusses signi ican policy implica ions,
and o e s sugges ions o u u e esea ch o deepen ou unde s anding o oil p ice
dynamics and hei mac oeconomic e ec s.
II. Li e a u e Re iew
This sec ion expands on he ea lie discussions by e iewing p e ious s udies o
s uc u al oil p ice shocks and hei mac oeconomic e ec s. Oil p ices ha e been
widely ecognized as a c ucial economic ac o due o hei signi ican in luence on
in la ion, economic g ow h, employmen , and o e all inancial s abili y. Owing o
hei b oad impac , ex ensi e esea ch has aimed o cla i y how oil p ice luc ua ions
a ec economic pe o mance and o iden i y p ecisely which unde lying ac o s
d i e hese changes.
Ea ly s udies, beginning no ably wi h Hamil on (1983), gene ally ea ed oil p ice
luc ua ions as exogenous shocks, ocusing p ima ily on sho - e m economic
ou comes. Hamil on’s ounda ional esea ch demons a ed ha sudden inc eases in
oil p ices nega i ely impac ed majo economies, esul ing in lowe economic
g ow h, inc eased in la ion, and highe unemploymen a es. These ea ly s udies
ypically ocused on di ec , immedia e e ec s and did no deeply in es iga e he
s uc u al ac o s unde lying oil p ice luc ua ions.
A signi ican me hodological ad ance was in oduced by Kilian (2009), who
a gued ha in e p e ing oil p ice changes as pu ely ex e nal shocks could cause
analy ical biases, especially e e se causali y, po en ially leading o inco ec policy
72 KDI Jou nal o Economic Policy Augus 2025
ecommenda ions. Kilian de eloped a s uc u al ec o au o eg ession (SVAR)
model ha explici ly iden i ied di e en s uc u al oil p ice shocks, in his case oil
supply shocks, economic ac i i y (global demand) shocks, and p ecau iona y demand
shocks, known as “oil-speci ic shocks.” Oil supply shocks ypically eme ge om
p oduc ion dis up ions due o geopoli ical e en s, na u al disas e s, o delibe a e
ou pu cu s by majo oil p oduce s. Economic ac i i y shocks e lec b oade global
demand luc ua ions d i en by wo ldwide economic expansions o down u ns.
P ecau iona y demand shocks, in con as , cap u e ma ke unce ain y and expec a ions
abou u u e oil supplies, mo i a ing ma ke pa icipan s o adjus hei in en o ies
in an icipa ion o possible sho ages.
Building upon Kilian’s (2009) s uc u al amewo k, Baumeis e and Hamil on
(2019) emphasized he impo ance o explici ly iden i ying in en o y- ela ed shocks
d i en by ma ke expec a ions and unce ain y. While ea lie s udies ypically
g ouped in en o y-d i en luc ua ions unde b oade demand shocks, Baumeis e
and Hamil on a gued ha in en o y shocks independen ly in luence oil p ice
dynamics and mac oeconomic ou comes. They dis inguished clea ly be ween wo
dis inc ypes o in en o y shocks: p ecau iona y in en o y shocks, e lec ing
genuine ma ke unce ain y ega ding u u e oil supply dis up ions, and specula i e
in en o y shocks, d i en by in es o expec a ions abou u u e p ice inc eases no
necessa ily aligned wi h ma ke undamen als. An impo an me hodological con ibu ion
o Baumeis e and Hamil on (2019) is hei applica ion o Bayesian econome ic
echniques o add ess iden i ica ion unce ain y explici ly. Using Bayesian in e ence
allowed hem o quan i y he unce ain y su ounding s uc u al shock iden i ica ion
by imposing in o ma i e p io s, he eby enabling mo e obus es ima ions and
in e p e a ions o he economic impac s o oil p ice luc ua ions. This Bayesian
app oach p o ided a s a is ically igo ous ounda ion o dis inguishing among
compe ing s uc u al hypo heses and unde sco ed he signi icance o clea ly iden i ying
each ype o shock o e alua e mac oeconomic e ec s accu a ely and o mula e
app op ia e policy esponses.
Cashin e al. (2014) simila ly in es iga ed s uc u al oil p ice shocks, dis inguishing
p ima ily be ween supply-d i en and demand-d i en shocks. Unlike Baumeis e and
Hamil on (2019), howe e , hei app oach did no explici ly sepa a e in en o y-
ela ed shocks in o p ecau iona y and specula i e ca ego ies. Consequen ly, he
analysis in Cashin e al. (2014) did no ully cap u e he dis inc mac oeconomic
implica ions associa ed wi h hese di e en in en o y-d i en shocks, ep esen ing a
key me hodological di e ence om he app oach adop ed by Baumeis e and
Hamil on (2019) and subsequen ly employed in ou cu en s udy. None heless,
Cashin e al. (2014) highligh ed ha oil-impo ing economies end o expe ience
ad e se economic e ec s ollowing supply-d i en p ice inc eases, aligning b oadly
wi h he indings o Baumeis e and Hamil on (2019) and ein o cing he impo ance
o explici ly di e en ia ing among s uc u al shocks o assess mac oeconomic
ou comes mo e accu a ely.
C oss e al. (2020) p o ided addi ional cla i y ega ding his dis inc ion, emphasizing
he di e en economic signals p ecau iona y and specula i e shocks gene a e. While
p ecau iona y shocks usually encou age p oduce s o main ain s able p oduc ion and
in en o y le els o manage po en ial dis up ions, specula i e shocks can send dis o ed
signals, causing p oduce s o delay p oduc ion o in es o s o accumula e excessi e
in en o ies. These dis inc ions ma e conside ably because he mac oeconomic e ec s
VOL. 47 NO. 3 The Mac oeconomic E ec s o S uc u al Oil P ice Shocks: An In e na ional GVAR Analysis 73
o p ecau iona y e sus specula i e shocks di e subs an ially, impac ing economic
s abili y and in o ming di e en policy ecommenda ions.
These explici s uc u al dis inc ions help explain why seemingly simila oil p ice
inc eases may esul in di e en mac oeconomic ou comes depending on he unde lying
shock. Fo example, demand-d i en oil p ice inc eases du ing global economic
expansions end o s imula e indus ial p oduc ion, inc ease expo s, and boos
economic ac i i y, al hough hey also aise in la ion p essu es due o highe inpu
cos s. In con as , supply-d i en p ice hikes caused by geopoli ical dis up ions
ypically p oduce nega i e economic impac s, pa icula ly o impo ing economies,
by di ec ly aising p oduc ion cos s and educing consume s’ pu chasing powe ,
consequen ly slowing economic g ow h.
Se e al s udies ha e speci ically analyzed oil p ice shocks in he con ex o open
economies, emphasizing how in e na ional economic connec ions shape domes ic
ou comes. Kilian e al. (2009) and Pee sman and Van Robays (2012) in es iga ed
he in e na ional spillo e e ec s o oil p ice shocks, demons a ing how global ade
and inancial linkages in luence di e en coun ies’ economic esponses. They
showed ha global in e dependencies can signi ican ly ampli y o mi iga e he
mac oeconomic e ec s o oil p ice luc ua ions, highligh ing he necessi y o
analyzing oil p ice shocks wi hin an open economy amewo k.
Speci ically, se e al s udies ha e ocused on Ko ea due o i s high dependence on
impo ed ene gy. An e al. (2017) applied Kilian’s s uc u al amewo k o assess
how dis inc oil p ice shocks in luence Ko ea’s expo s, impo s, and cu en accoun
balance di e en ly. Thei indings demons a ed ha s uc u al shocks—supply
dis up ions, economic ac i i y changes, o p ecau iona y shocks— esul ed in dis inc
mac oeconomic esponses, depending on he ype o shock. Chon and Jung (2021)
ein o ced hese indings by inco po a ing Ko ea’s GDP g ow h and in la ion, showing
clea ly di e en ia ed economic impac s be ween demand-d i en and p ecau iona y
shocks. They ound ha demand-d i en oil shocks gene ally inc eased economic
g ow h, whe eas p ecau iona y shocks p ima ily aised in la ion wi hou signi ican ly
bene i ing economic pe o mance.
Howe e , adi ional single-coun y SVAR analyses, despi e ea ing oil p ice
shocks as exogenous a iables, ace limi a ions in clea ly dis inguishing domes ic
e ec s om indi ec global spillo e e ec s, pa icula ly o small open economies
such as Ko ea. To add ess his me hodological gap, Jeong (2014) adop ed a global
VAR (GVAR) amewo k ha explici ly inco po a es in e na ional economic linkages
while s ill ea ing oil p ice shocks as exogenous. Jeong’s analysis clea ly demons a ed
ha indi ec in e na ional spillo e e ec s signi ican ly in luenced Ko ea’s mac oeconomic
ou comes. Simila ly, s udies by Kim and Pa k (2009) and Shin e al. (2013)
employed GVAR models o analyze he spillo e phenomenon in small open
economies, highligh ing he impo ance o cap u ing global economic in e ac ions o
imp o e he accu acy o mac oeconomic analyses.
Despi e hese ad ances, exis ing s udies based on GVAR models gene ally did no
explici ly inco po a e s uc u al shock iden i ica ion, limi ing hei explana o y powe .
Recognizing his gap, he cu en s udy in eg a es he explici s uc u al shocks
me hodology p oposed by Baumeis e and Hamil on (2019) in o a comp ehensi e
global analy ical amewo k. Speci ically, we apply hei s uc u al shock classi ica ion
app oach wi hin a GVAR model, compa ing mac oeconomic esponses ac oss selec ed
oil-impo ing coun ies (Ko ea and China) and majo oil-expo ing economies
74 KDI Jou nal o Economic Policy Augus 2025
(Canada and he Uni ed S a es). By explici ly combining global economic modeling
wi h his ype o s uc u al shock analysis, ou s udy p o ides clea e insigh s in o
how di e en s uc u al oil shocks dis inc ly a ec economic ou comes, con ibu ing
o he exis ing li e a u e and in o ming policy discussions.
In he nex sec ion, we desc ibe ou empi ical me hodology in de ail. We explici ly
p esen he GVAR modeling amewo k and he s uc u al shock classi ica ion
me hod adop ed om Baumeis e and Hamil on (2019). This clea and in eg a ed
app oach allows us o be e iden i y mac oeconomic impac s associa ed wi h
dis inc s uc u al shocks, add essing exis ing esea ch gaps and o e ing p ac ical
guidance o policymake s.
III. Empi ical Model and Me hodology
To analyze sys ema ically how s uc u al oil p ice shocks p opaga e h ough he
global economy and in luence mac oeconomic ou comes, we adop an in eg a ed
me hodological app oach combining he global ec o au o eg ession (GVAR) model
de eloped by Chudik and Pesa an (2015) and he s uc u al shocks iden i ica ion
amewo k p oposed by Baumeis e and Hamil on (2019). This combined app oach
add esses ce ain key limi a ions o p e ious empi ical analyses by explici ly conside ing
s uc u al shocks wi hin an open economy amewo k. The me hodological igo he e is
pa icula ly c i ical o accu a ely cap u ing he di ec and indi ec in e na ional
ansmission channels h ough which global oil shocks in luence domes ic economies.
The GVAR model was selec ed due o i s p o en capabili y in cap u ing in e na ional
economic in e dependencies and spillo e e ec s, which is especially sui able o
analyzing small open economies such as Ko ea. By explici ly inco po a ing o eign
mac oeconomic a iables cons uc ed as weigh ed a e ages based on bila e al ade
lows, he GVAR amewo k p o ides a comp ehensi e ool o acing how global
shocks di use ac oss in e connec ed economies, o e ing p ecise quan i ica ion o
bo h di ec and indi ec mac oeconomic impac s.
A. Global VAR (GVAR) F amewo k
The GVAR model, de eloped by Chudik and Pesa an (2015), cap u es he global
in e dependencies and dynamic ela ionships among in e na ional mac oeconomic
a iables, making i especially sui able o analyzing he ansmission o ex e nal
shocks in small open economies such as Ko ea. Each coun y-speci ic VAR wi hin
he GVAR model includes bo h domes ic and o eign a iables, wi h o eign
a iables ep esen ed as ade-weigh ed a e ages o co esponding a iables om
o he coun ies. Fo mally, he coun y-speci ic GVAR model o coun y
i
a ime
can be exp essed as in Equa ion [1] using a VARX*
()
ii
ss
model, as p esen ed
in Equa ion [2].
[Equa ion 1]
01
,,,
i i i i i i i i i i i
Ls x a a Ls x A Ls u
Z
Z
) *
He e, he e o e m
i
u
is assumed o ha e no c oss-co ela ion o au oco ela ion.
The ex e nal a iables
i
x
o each coun y a e cons uc ed by aking he ade-
VOL. 47 NO. 3 The Mac oeconomic E ec s o S uc u al Oil P ice Shocks: An In e na ional GVAR Analysis 75
weigh ed c oss-sec ion a e age o o he coun ies’ domes ic a iables,
,,,,,
jijj
N
xxjN
Z
}
1
Σ12
and he weigh s sum o 1. Common global a iables, such as s uc u al oil shocks
and oil p ices, can be ea ed as exogenous in he model.
B. Da a Desc ip ion and Va iable Selec ion
Ou empi ical analysis u ilizes he Global VAR (GVAR) da ase in oduced by
Mohaddes and Raissi (2020), which co e s 33 majo economies collec i ely
accoun ing o o e 90% o global GDP. The da ase has been ex ended in his s udy
o include he pe iod om he second qua e o 1979 h ough he i s qua e o
2020. The da a include key mac oeconomic a iables necessa y o analyze
in e na ional economic in e ac ions and spillo e e ec s.
Fo each economy, his s udy cons uc s coun y-speci ic ec o au o eg ession
(VAR) models, cap u ing bo h domes ic economic condi ions and in e na ional
linkages. The models inco po a e eal g oss domes ic p oduc (GDP) da a and he
Consume P ice Index (CPI), ob ained om seasonally adjus ed IMF In e na ional
Financial S a is ics (IFS) and Ha e Analy ics. To e lec inancial ma ke condi ions
and mone a y policy en i onmen s, sho - e m and long- e m in e es a es de i ed
om Ha e Analy ics and he IMF IFS a e included, speci ically co e ing easu y
bill a es, deposi a es, discoun a es, and money ma ke a es app op ia e o each
coun y’s inancial ma ke s uc u e. Addi ionally, exchange a es—calcula ed as
qua e ly a e ages o bila e al nominal exchange a es agains he US dolla —a e
inco po a ed. All a iables a e consis en ly cons uc ed ac oss economies acco ding
o he s anda d GVAR amewo k, including loga i hmic ans o ma ions.
To iden i y s uc u al shocks, his s udy employs an upda ed e sion o he da ase
used in Baumeis e and Hamil on (2019). Oil supply shocks a e iden i ied using
B en c ude oil p ices sou ced om Bloombe g, calcula ed as qua e ly a e ages o
daily closing p ices. Agg ega e demand shocks (economic ac i i y shocks) a e
iden i ied using he global economic ac i i y index om he OECD Main Economic
Indica o s (MEI) da abase, which agg ega es indus ial p oduc ion indices o OECD
coun ies and six majo non-membe coun ies (B azil, China, India, Indonesia,
Russia, and Sou h A ica) using weigh s p o ided by he IMF Wo ld Economic
Ou look (WEO). In en o y-d i en demand shocks a e iden i ied using qua e ly
global oil in en o y da a calcula ed om OECD c ude oil in en o y s a is ics, which
a e de i ed om U.S. c ude oil in en o y da a p o ided by he U.S. Ene gy
In o ma ion Adminis a ion (EIA), e lec ing changes in ma ke pa icipan s’
expec a ions abou u u e supply-demand imbalances.
Figu e 1 illus a es qua e ly a e ages o he iden i ied s uc u al shocks—
economic ac i i y shocks, oil supply shocks, and in en o y shocks—o e he pe iod
o 1979 o 2020. Economic ac i i y shocks gene ally ack majo global economic
cycles, while oil supply shocks a e less ola ile and co espond o ecognized
his o ical geopoli ical o p oduc ion e en s. In en o y demand shocks exhibi
ela i ely equen sho - e m ola ili y, e lec ing ma ke -d i en expec a ions and
76 KDI Jou nal o Economic Policy Augus 2025
FIGURE 1. DOMESTIC GDP RESPONSES TO ECONOMIC ACTIVITY SHOCKS
No e: The igu e displays qua e ly a e ages o he economic ac i i y, oil supply, and oil in en o y demand shocks
as iden i ied by Baumeis e and Hamil on (2019).
unce ain ies. Howe e , cau ion is equi ed when in e p e ing hese shocks di ec ly,
as hei iden i ica ion elies on speci ic modeling assump ions and he da a sou ces
used. By explici ly dis inguishing hese h ee s uc u al shocks, ou analysis p o ides
clea e insigh s in o how di e en ac o s d i ing oil p ice luc ua ions a ec key
economic indica o s.
Ou es ima ion p ocedu e wi hin he GVAR amewo k elies p ima ily on
gene alized impulse esponse unc ions (GIRFs). GIRFs allow us o ace he
dynamic e ec s o each s uc u al oil p ice shock on economic a iables such as he
eal GDP and consume p ices, explici ly accoun ing o global economic linkages.
Using GIRFs, his pape demons a es how dis inc s uc u al shocks p opaga e
ac oss in e connec ed global economies o e ime.
By combining he obus ness o he GVAR modeling app oach wi h he clea
s uc u al shock classi ica ion p oposed by Baumeis e and Hamil on (2019), ou
analysis deli e s de ailed insigh s. This me hodology imp o es ou unde s anding o
how speci ic s uc u al oil shocks di e en ly in luence oil-impo ing and oil-
expo ing economies, hus o e ing aluable guidance o policymake s acing
complex global ene gy ma ke dynamics.
In he ollowing sec ion, we p esen de ailed empi ical esul s de i ed om his
me hodological amewo k, highligh ing coun y-speci ic esponses o each ype o
s uc u al oil shock.
IV. Empi ical In es iga ion
A. Weak Exogenei y Tes s o Global Va iables in he GVAR Model
Be o e analyzing he ansmission o s uc u al oil p ice shocks h ough impulse
esponse unc ions, i s we assess he alidi y o including global a iables—oil
p ices (oil p ice), economic ac i i y demand shocks (Ac i i y), oil supply shocks
(Supply), and oil in en o y demand shocks (In en o y)—in ou global VAR model.
Speci ically, we conduc weak exogenei y es s ollowing he me hodology ou lined
VOL. 47 NO. 3 The Mac oeconomic E ec s o S uc u al Oil P ice Shocks: An In e na ional GVAR Analysis 83
FIGURE 8. DOMESTIC GDP RESPONSES TO OIL PRICE SHOCKS
No e: The solid line ep esen s he median esponse o domes ic GDP o a one-s anda d-de ia ion shock in oil p ices
(oil p ice shock i sel ), es ima ed om he GVAR model. The do ed lines indica e he co esponding 90% boo s ap
con idence in e als.
Sou ce: Calcula ed by he au ho .
FIGURE 9. CPI RESPONSES TO OIL PRICE SHOCKS
No e: The solid line ep esen s he median esponse o he Consume P ice Index (CPI) o a one-s anda d-de ia ion
shock in oil p ices (oil p ice shock i sel ), es ima ed om he GVAR model. The do ed lines indica e he
co esponding 90% boo s ap con idence in e als.
Sou ce: Calcula ed by he au ho .
84 KDI Jou nal o Economic Policy Augus 2025
o di e en ia ing among s uc u al shocks o assess mac oeconomic impac s mo e
comp ehensi ely.
O e all, he compa a i e assessmen o selec ed coun ies highligh s subs an ial
di e ences in mac oeconomic ou comes compa ed o analyses no accoun ing o
s uc u al dis inc ions. Canada, China, he Uni ed S a es, and Ko ea gene ally
demons a ed posi i e esponses o economic ac i i y shocks, hough China displayed
mixed o sligh ly nega i e esponses in some scena ios. Speci ically, Ko ea p esen ed
pa icula complexi ies in ha posi i e economic esponses occasionally coincided
wi h unexpec ed declines in consume p ices, sugges ing possible coun y-speci ic
s uc u al o ma ke ac o s complica ing s aigh o wa d in e p e a ions. Simila ly,
China’s economic esponses o ce ain oil shocks, while nega i e in some cases, we e
s a is ically insigni ican , highligh ing he in e p e a i e challenges inhe en in
analyses no speci ically iden i ying s uc u al shocks.
These indings emphasize a c i ical poin : wi hou explici s uc u al shock analyses,
iden i ying he b oade mac oeconomic implica ions o oil p ice luc ua ions emains
challenging. In e p e ing hese shocks me ely as sho - e m cos inc eases can lead
o o e simpli ied and po en ially misguided policy ecommenda ions. The e o e, ou
analysis highligh s he impo ance o explici ly dis inguishing economic ac i i y,
supply, and in en o y shocks, p o iding policymake s and esea che s wi h nuanced
insigh s in o he di e se mac oeconomic impac s associa ed wi h oil p ice
luc ua ions. This unde s anding is essen ial o de eloping in o med and a ge ed
policy esponses ha mi iga e mac oeconomic isks, enhance economic esilience,
and s eng hen mac oeconomic s abili y amid ongoing global ene gy ansi ions and
pe sis en geopoli ical unce ain ies.
In addi ion o s uc u al shocks (economic ac i i y, oil supply, and in en o y
shocks), we also di ec ly analyze he mac oeconomic esponses o shocks s emming
om oil p ice changes hemsel es. This analysis allows o a compa a i e
assessmen o he e ec s om explici ly iden i ied s uc u al shocks e sus di ec
p ice luc ua ions wi hou s uc u al iden i ica ion. Figu es 8 and 9 illus a e he
esponses o domes ic GDP and consume p ices, espec i ely, o hese di ec oil
p ice shocks. No ably, he esponses o di ec oil p ice shocks exhibi subs an ially
di e en pa e ns compa ed o esponses explici ly linked o s uc u al ac o s,
highligh ing he po en ial isks o in e p e ing oil p ice changes solely as exogenous
p ice mo emen s. These indings u he ein o ce he impo ance o explici ly
analyzing s uc u al shocks o a oid misin e p e a ions ega ding mac oeconomic
implica ions, a poin also unde sco ed by Baumeis e and Hamil on (2019) and
Cashin e al. (2014).
V. Summa y and Implica ions
This pape empi ically analyzed he mac oeconomic impac s o s uc u al oil p ice
shocks using a global ec o au o eg ession (GVAR) amewo k, inco po a ing he
s uc u al shock classi ica ion es ablished by Baumeis e and Hamil on (2019). We
explici ly dis inguished among economic ac i i y shocks ela ed o global demand
condi ions, oil supply shocks om geopoli ical dis up ions o p oduc ion cons ain s,
and oil in en o y demand shocks e lec ing ma ke expec a ions abou u u e supply-
demand imbalances. This classi ica ion enabled a de ailed assessmen o he
VOL. 47 NO. 3 The Mac oeconomic E ec s o S uc u al Oil P ice Shocks: An In e na ional GVAR Analysis 85
mac oeconomic e ec s associa ed wi h di e en ypes o oil shocks, pa icula ly
ele an o small open economies such as Ko ea, gi en i s high dependency on
impo ed ene gy and sensi i i y o global oil p ice ola ili y.
Ou analysis indica es subs an ial a ia ion in mac oeconomic ou comes depending
on he ype o s uc u al shock. Economic ac i i y shocks, d i en by global demand
changes, gene ally had posi i e e ec s on economic g ow h ac oss he selec ed
coun ies (Ko ea, Canada, China, and he Uni ed S a es). Du ing pe iods o global
economic expansion, indus ial p oduc ion, consump ion, and GDP g ow h esponded
posi i ely. Howe e , hese shocks also esul ed in inc eased in la iona y p essu es
due o highe ene gy and anspo a ion cos s. In la ion esponses we e s a is ically
signi ican in Canada, China, and he Uni ed S a es bu we e less p onounced and
s a is ically weake in Ko ea. These di e ences may s em om ac o s such as
ene gy ma ke s uc u es, egula o y en i onmen s, and he mechanisms ansmi ing
oil p ice luc ua ions o domes ic p ices—all a eas equi ing u he esea ch.
Nega i e oil supply shocks, ypically esul ing om geopoli ical dis up ions o
p oduc ion cons ain s, showed p onounced di e ences be ween oil-impo ing and
oil-expo ing coun ies. Oil-impo ing na ions such as Ko ea and China expe ienced
immedia e nega i e economic e ec s om inc eased impo cos s, highe p oduc ion
expenses, and educed consume pu chasing powe . In con as , oil-expo ing
coun ies such as he Uni ed S a es and Canada bene i ed om highe oil p ices,
d i en by hei capaci y o expand domes ic p oduc ion and expo s. I should be
no ed, howe e , ha addi ional complexi ies—such as ma ke compe i ion o
p oduc ion lexibili y—we e beyond he scope o his analysis.
The s udy also unde sco es he signi icance o oil in en o y demand shocks,
e lec ing shi s in ma ke expec a ions pe aining o u u e supply-demand imbalances.
In en o y-d i en shocks caused sho - e m ola ili y in oil p ices and in la ion, wi h
di e ing implica ions o a ious economies. Fo oil-impo ing coun ies, inc eased
oil in en o ies ypically lowe ed oil p ices, empo a ily educing in la iona y p essu es
and p oduc ion cos s. Howe e , o economies such as Ko ea, hea ily elian on
pe ochemical expo s, alling oil p ices could po en ially comp ess p o i ma gins
and weaken expo compe i i eness, sugges ing he need o sec o -speci ic analyses.
In oil-expo ing na ions such as Canada and he Uni ed S a es, inc eased oil
in en o ies we e ini ially associa ed wi h empo a y declines in immedia e demand,
leading o educed p oduc ion and in es men le els. These nega i e e ec s we e
sho -li ed, wi h ma ke adjus men s quickly es o ing equilib ium and suppo ing
an economic eco e y. Consume p ice esponses o in en o y shocks we e modes
and empo a y, equi ing u he in es iga ion, pa icula ly conce ning in en o y
managemen p ac ices and ma ke dynamics.
Ou empi ical esul s also con i med he assump ion o weak exogenei y o global
a iables wi hin he GVAR amewo k, suppo ing he alidi y o ou model.
Howe e , hese indings should be in e p e ed cau iously due o po en ial da a o
model limi a ions no explici ly es ed he e.
In conclusion, ou s udy demons a es he c i ical impo ance o dis inguishing
clea ly among di e en s uc u al shocks when analyzing oil p ice luc ua ions.
Recognizing he speci ic mac oeconomic impac s associa ed wi h each shock ype
helps policymake s ailo esponses o mi iga e isks and enhance economic
esilience. Gi en ongoing global ene gy ansi ions and geopoli ical unce ain ies,
u he esea ch is needed o deepen ou unde s anding o oil ma ke dynamics and
86 KDI Jou nal o Economic Policy Augus 2025
o e ine me hods o iden i ying s uc u al shocks, ul ima ely suppo ing mo e
e ec i e and a ge ed policy decisions.
VOL. 47 NO. 3 The Mac oeconomic E ec s o S uc u al Oil P ice Shocks: An In e na ional GVAR Analysis 87
APPENDIX
TABLE A1—DESCRIPTIVE STATISTICS OF GLOBAL VARIABLES
S a is ics
Mean
Median
Maximum
Minimum
S d. de .
Skewness
Ku osis
Oil P ice
3.741
3.868
4.811
2.407
0.691
-
0.136
1.658
Demand
-
0.024
0.007
1.368
-
1.722
0.356
-
0.633
8.811
Oil I
n en
-
0.110
-
0.102
1.298
-
1.615
0.635
-
0.125
2.790
Oil S
upply
-
0.137
-
0.134
2.566
-
3.778
0.750
-
0.522
7.447
Sou ce: Calcula ed by he au ho .
TABLE A2—ORDER OF WEAK EXOGENEITY REGRESSION EQUATIONS
(p*: lag o de o domes ic a iables, q*: lag o de o o eign a iables)
Coun y
p*
q*
ARGENTINA
1
2
AUSTRALIA
1
2
BRAZIL
1
2
CANADA
1
2
CHINA
2
2
CHILE
1
2
EURO
1
2
INDIA
1
2
INDONESIA
1
2
JAPAN
1
2
KOREA
1
2
MALAYSIA
1
2
MEXICO
1
2
NORWAY
1
2
NEW ZEALAND
1
2
PERU
1
2
PHILIPPINES
1
2
SOUTH AFRICA
1
1
SAUDI ARABIA
1
2
SINGAPORE
1
2
SWEDEN
1
1
SWITZERLAND
1
2
THAILAND
1
2
TURKEY
1
2
UK
1
1
USA
1
2
Sou ce: Calcula ed by he au ho .
88 KDI Jou nal o Economic Policy Augus 2025
REFERENCES
Baumeis e , Ch is iane and James D. Hamil on. 2019. “S uc u al In e p e a ion o Vec o
Au o eg essions wi h Incomple e Iden i ica ion: Re isi ing he Role o Oil Supply and
Demand Shocks,” Ame ican Economic Re iew, 109(5): 1873-1910.
Cashin, Paul, Kamia Mohaddes, Mazia Raissi, and Mehdi Raissi. 2014. “The Di e en ial
E ec s o Oil Demand and Supply Shocks on he Global Economy,” Ene gy Economics,
44(C): 113-134
Chudik, Alexande and M. Hashem Pesa an.
2015. “Common Co ela ed E ec s Es ima ion o
He e ogeneous Dynamic Panel Da a Models wi h Weakly Exogenous Reg esso s,” Jou nal o
Econome ics, 188(2): 393-420.
Jamie L. C oss, Bao H. Nguyen, and T ung Duc T an. 2020. “The Role o P ecau iona y and
Specula i e Demand in he Global Ma ke o C ude Oil,” CAMA Wo king Pape No. 34.
Hamil on, J. D. 1983. “Oil and he Mac oeconomy since Wo ld Wa II,” Jou nal o Poli ical
Economy, 91(2): 228-248.
In e na ional Ene gy Agency (IEA). 2023. “Wo ld Ene gy Ou look 2023. Pa is: In e na ional
Ene gy Agency,” Re ie ed om h ps://www.iea.o g/ epo s/wo ld-ene gy-ou look-2023.
Kilian, Lu z. 2009. “No All Oil P ice Shocks A e Alike: Disen angling Demand and Supply
Shocks in he C ude Oil Ma ke ,” Ame ican Economic Re iew, 99(3): 1053-1069.
Kilian, Lu z, Alessand o Rebucci, and Nikola Spa a o a. 2009. “Oil Shocks and Ex e nal
Balances,” Jou nal o In e na ional Economics, 77(2): 181-194.
Koop, G., M. H. Pesa an, and S. M. Po e . 1996. “Impulse Response Analysis in Nonlinea
Mul i a ia e Models,” Jou nal o Econome ics, 74(1): 119-147.
Mohaddes, K. and M. Raissi.
2020. “Compila ion, Re ision and Upda ing o he Global VAR (GVA R )
Da abase,” Camb idge Wo king Pape s in Economics.
Pee sman Ge and Ine Van Robays. 2012. “C oss-Coun y Di e ences in he E ec s o Oil
Shocks,” Ene gy Economics, 34(5): 1532-1547.
Kim, Yun-Yeong and Pa k, Joon-Yong. 2009. T ansmission E ec s o Fo eign Shock: Global
S uc u al VAR App oach,” Bank o Ko ea Analysis o Financial Economy, 358: 1-32 (in
Ko ean).
Shin, Yongcheol, Sangdon Boo, and Yongmin Kim. 2013. “Measu ing he Connec edness o he
Ko ean Financial Sys em: The GVAR-GCM Modeling App oach,” Bank o Ko ea (in Ko ean).
Ahn, Sungbae, Sungyup Cho, Jeong Ho Kim, and Kang-Hoon Lee. 2017. Changes in
In e na ional Ene gy Ma ke and Thei Impac on he Ko ean Economy. Ko ea Ins i u e o
In e na ional Economic Policy (KIEP) Resea ch Repo , Vol. 17, No. 27. (in Ko ean).
Chung, Jun Hwan. 2014. The Mac oeconomic E ec s o Oil P ice Shocks in Ko ea. Ko ea
Ene gy Economics Ins i u e (KEEI). (in Ko ean).
Chon, So a and Kyu-Chul Jung. 2021. Recen Oil P ice Hikes and he Ripple E ec on he
Ko ean Economy. KDI Economic Ou look, Fi s Hal 2021. (in Ko ean).
LITERATURE IN KOREAN
ӣ
ӣԫ߅ળ
|Ӗ۽ߥ ҳઑ 7"3 ݽഋ ೠ ೧৻Ѻ әബҗ ࠙ࢳ} ~҃ઁোҳ
୍ԫ࢚ࠗتԫӣ
|.FBTVSJOHUIF$POOFDUFEOFTTPG,PSFBO'JOBODJBM4ZTUFN5IF(7"3
($..PEFMJOH"QQSPBDI} ೠҴ೯
উࢿߓԫউࢿߓԫӣӝജԫӣࣻ࠼ԫ൞ԫೠࣻ
|Ҵઁীց ҳઑ߸ച Ѣ҃ઁബҗ ࠙ࢳ} ~৻҃ઁ
଼োҳোҳࠁҊࢲ
ળജ
|о߸ز Ҵղ Ѣ҃ઁ әബҗ ࠙ࢳ} ীց҃ઁোҳ
ୌࣗۄԫӏ୍
|୭Ӕ о ࢚ Ҵղ ҃ઁ әബҗ} ~,%* ҃ઁݎ֙ ࢚߈ӝ
