Energy and Fiscal Shocks: Reassessing Industrial Competitiveness

Carl Grekou, Thomas Grjebine and Florian Morvillier

Working Papers from CEPII research center

Abstract: Energy price shocks never occur in isolation: their impact is shaped by the broader macroeconomic context, in particular by governments' fiscal stance. This paper investigates how two key forces-energy price shocks and demand stimuli induced by fiscal policy-affect industrial performance in advanced economies, and shows that their effects depend critically on trade exposure. Using sector-level data for 30 countries over the period 1978-2022, we find that rising energy prices reduce manufacturing value added through both cost and demand channels, with more persistent effects in less open sectors. In contrast, demand-led fiscal expansions generate more complex dynamics: while boosting domestic sales, they simultaneously weaken external competitiveness. On average, a 1% increase in domestic demand leads to a 1.8% decline in manufacturing exports within three years. The overall effect on value added depends on the degree of trade openness - it is positive in the short term for sheltered sectors, but turns negative after two years in globally integrated ones.

Keywords: Energy Prices; Demand Shocks; Industry; Competitiveness (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Date: 2025-12
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cepii.fr/PDF_PUB/wp/2025/wp2025-19.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2025-19

Access Statistics for this paper

More papers in Working Papers from CEPII research center Contact information at EDIRC.
Bibliographic data for series maintained by ().