The Relationship between World Oil Price and Consummer Price Index in Korea

국제유가와 소비자물가의 변동

This paper investigates the existence of a long-run relationship between world oil price and consumer price index for Korea during 1983~1999. The cointegration and error correction modelling approaches have been applied. Empirical results suggest that there exists a long-run relationship among world oil prices. consumer prices, M2 and a production gap variable. The dynamic behavior of the relationship has been investigated by estimating a error correction model, in which the error correction term have been found significant. The error correction model has also been found to be robust as it satisfy almost all relevant diagnostic tests.