The impact of higher energy prices on growth and inflation in an industrializing economy: the Korean experience

The first serious problem faced by the Korean economy in recent years is the stagflation caused by the increasing energy cost of imported oil. How much does the oil crisis contribute to Korean inflation and unemployment? To answer the question, a variable input-output model is introduced. It differs from conventional models in one important respect: it allows the industrial structure to change in response to changing input costs. Under the model, the technical coefficient becomes an endogenous variable, a property that conventional input-output models fail to share.