Korea, in its pursuance of an export-oriented growth strategy, was gravely hit by the two oil price shocks in the 1970s, but overcame the difficulties with fairly successful adjustment policies. This paper reviews the recent macroeconomic evolution of Korea by describing its basic policy regimes, domestic as well as external shocks, and the ensuing policy responses. It also investigates the impact of external shocks on the Korean economy and evaluates the role of major macro-policies by examining the stance of fiscal and monetary policy. Fiscal policy is analyzed using the IMF and OECD measures of fiscal impulse, while the analysis of monetary policy is based on the estimation of a rather standard demand for money equation. The paper has found that external shocks had profound adverse effects on Korea's current account, growth and inflation, while the favorable external environment since 1983 helped the economy significantly. The real exchange rate was observed to have played a central role in encouraging growth in 1980 and since 1983 when domestic prices were stabilized. Finally, it has also found that both fiscal and monetary policies in Korea were utilized in a very discretionary way. Since the late 1970s, these policies have been used to achieve price stabilization.