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KDI JEP Effects of Weather Conditions on Price in Korea November 30, 2025

KDI JEP
KDI JEP Effects of Weather Conditions on Price in Korea

November 30, 2025

  • 프로필
    Seunghee Lee

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.

Contents
 I. Introduction
 II. Related Literature
 III. Impact of Weather Condition Changes on Price Levels
 IV. Interaction between Headline and Core Inflation
 V. Conclusion
 APPENDIX
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