Reimagining Recovery: Macroeconomic Power of Energy Efficiency in Crisis Times

This paper examines the profound effects of the COVID-19 pandemic on South Korean society, particularly focusing on the economic repercussions of a shock in energy use efficiency from Q1 2020 to Q3 2023. Employing advanced Bayesian estimation and impulse response function methods, the study reveals that enhanced energy use efficiency significantly boosts key economic metrics, including output, consumption, employment, energy use, real wages and investment. Additionally, an increase in real money holdings and a decrease in both deposit and loan interest rates are observed. The analysis further explores the impact of monetary policy adjustments made by South Korea to mitigate the economic challenges posed by the pandemic. Our results indicate that these policy shifts temporarily elevate the aforementioned economic variables and raise deposit and loan interest rates, despite a concurrent reduction in real wages. The findings provide critical insights for policy formulation and economic recovery strategies in the context of global health crises.