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Oil Shocks and the Excise Duty Tax in a DSGE Model Setting

Črt Lenarčič ()

Zagreb International Review of Economics and Business, 2018, vol. 21, issue 2, 49-69

Abstract: This paper sets up a small open economy general equilibrium model operating in a monetary union. Exogenous oil shocks that hit the modelled economy are alleviated by introducing a pro-cyclical excise duty tax rule on oil prices. It provides a model-based theoretical background for studying a fiscal response of curbing the negative effects of volatile global oil prices on inflation. Against this backdrop, we estimate the key parameters of the DSGE model and simulate different responses of the fiscal policy tax rule, based on different values of the responsiveness of the excise duty parameter. JEL Classification: E31, E32, E62

Keywords: Oil shocks; fiscal policy tax rule; DSGE model; inflation (search for similar items in EconPapers)
Date: 2018
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Zagreb International Review of Economics and Business, Faculty of Economics and Business, Trg J. F. Kennedy 6, 10000 Zagreb, Croatia.
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DOI: 10.2478/zireb-2018-0014

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