Oil Prices, World Trade Policy Uncertainty, and the Trade Balance: The Case of Korea

Abstract

This article studies the asymmetric effects that the price of crude oil has on Korean exports to and imports from its largest partners—China, the U.S., and Japan—controlling for world trade policy uncertainty. The results support the evidence of the long-run asymmetry of oil prices for Korea’s exports to Japan, and imports from China and Japan. However, there is no evidence of the short-run asymmetry of oil prices. Finally, world trade policy uncertainty appears to be more important for determining Korea’s bilateral trade in the short run than in the long run.