Energy Inflation and Consumption Inequality

Francesco Ricciutelli

MPRA Paper from University Library of Munich, Germany

Abstract: Recent research unveiled the heterogeneous effects of rising energy prices for low-income and high-income European households, as they tend to purchase distinct consumption baskets. We explore the effects of energy inflation on consumption inequality in a Two-Agent New Keynesian (TANK) model with an exogenous energy sector, and look for the optimal monetary policy response to an energy price shock. We find that rising energy prices widen consumption inequality through the expansions of inflation and income gaps. The effects of a maximizing welfare monetary policy are partially approximated by a core inflation targeting Taylor rule.

Keywords: TANK Models; Energy; Consumption Inequality; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E52 I14 Q43 (search for similar items in EconPapers)
Date: 2024-05-13
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ene and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:120899

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