Abstract
The primary contribution of this paper is to investigate the impacts that three components of oil shocks – oil supply shocks, aggregate demand shocks, and oil-specific demand shocks – have on three measures of Korea’s trade balances – oil, non-oil, and total trade balances – with its top three trading partners – China, the United States and Japan. We reveal that aggregate demand shocks have the greatest impact on Korea’s trade balances, while oil supply shocks have negligible impacts. Additionally, the overall impact of the three oil shocks on Korea’s trade balances with its top three partners appears to rely on the response of the non-oil trade balance.
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