Do oil price changes have symmetric or asymmetric effects on Korea’s demand for imported crude oil?

The existing literature on demand for crude oil in developed and developing countries typically assumes that the effects of oil price changes are symmetric. In this paper, we use the nonlinear autogressive distributed lag (ARDL) approach of Shin et al. (2014) and test whether the effect of oil price changes on demand for imported crude oil is symmetric or asymmetric in the case of Korea. Using quarterly data over the last two decades, the results show that the oil price effects are indeed asymmetric in the long run; Korea’s imported demand for crude oil is more responsive to oil price spikes than to oil price plunges. However, the asymmetric effects are not observed in the short run.