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  • P-ISSN 2586-2995
  • E-ISSN 2586-4130
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KDI Journal of Economic Policy. Vol. 47, No. 4, November 2025, pp. 131-158

https://doi.org/10.23895/kdijep.2025.47.4.131

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Effects of Weather Conditions on Prices in Korea

SEUNGHEE LEE

Author & Article History

Manuscript received 17 June 2025; revision received 19 June 2025; accepted 25 July 2025.

Abstract

This paper examines the effects of unexpected changes in weather conditions on inflation in Korea. Using a structural vector autoregression (SVAR) model, we analyze how changes in temperature and precipitation influence price dynamics across different components of the consumer price index (CPI). Our empirical analysis reveals that unexpected changes in weather indices induce significant volatility in fresh food prices and exert direct impacts on consumer inflation, with precipitation changes contributing more substantially to short-term price increases than temperature variations. The effects are particularly pronounced during summer. However, core inflation, which excludes volatile food and energy components, remains largely unresponsive to weather indices. Through a regression analysis examining the interaction between headline and core inflation, we find that consumer prices tend to revert to core inflation levels, suggesting that weather-induced price fluctuations have limited medium-term impacts on the underlying inflation trend. These findings indicate that while weather changes may increase short-term price volatility through agricultural supply disruptions, monetary policy responses to such temporary fluctuations may be ineffective. Accordingly, alternative policy measures focusing on supply diversification and climate resilience should be prioritized.

Keywords

Climate Change, Inflation, Monetary

JEL Code

E31, E52, Q54

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