Unraveling the COVID-19 Pandemic’s Impact on South Korea’s Macroeconomy: Unearthing Novel Transmission Channels within the Energy Sector and Production Technologies

Abstract

As a consequence of the COVID-19 pandemic, Korea’s economy has experienced significant setbacks. Thus, this article examines the implications of the COVID-19 pandemic on Korea’s key macroeconomic indicators via the transmission channels of oil prices and production technology. Using Bayesian estimation and impulse response functions for empirical investigation, the results suggest that the COVID-19 pandemic has intensified the reduction in firm production, consumption of oil-based goods, employment, and investment. Increasingly, households rely on non-oil goods rather than oil-based ones. Similarly, the results suggest that the drop in production technology levels brought on by the COVID-19 pandemic has a stronger impact on business output and investment but a lesser influence on household employment. The COVID-19 pandemic has led to a decline in household non-oil consumption as well as household and business consumption of oil-based goods. To sum up, the existing Korean literature on this issue might be improved by including the findings offered in this article.