Hicks in HANK: Fiscal Responses to an Energy Shock

Christian Bayer, Alexander Kriwoluzky, Müller, Gernot and Fabian Seyrich
Authors registered in the RePEc Author Service: Gernot J. Müller

No 18557, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The distributional and disruptive effects of energy supply shocks are potentially large. We study the effectiveness of alternative fiscal responses in a two-country HANK model that we calibrate to the euro area. Energy subsidies can stabilize the domestic economy, but are fiscally costly and generate adverse spillovers to the rest of the monetary union: What the subsidizing country gains, the other countries lose. Transfers based on historical energy consumption in the form of a Hicks/Slutsky compensation are less effective domestically as subsidies but do not harm economic activity abroad. In addition, transfers increase welfare at Home while subsidies reduce welfare.

Keywords: Energy crisis; Subsidies; Transfers (search for similar items in EconPapers)
JEL-codes: D31 E64 F45 Q41 (search for similar items in EconPapers)
Date: 2023-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18557 (application/pdf)

Related works:
Working Paper: Hicks in HANK: Fiscal Responses to an Energy Shock (2023)
Working Paper: Hicks in HANK: Fiscal Responses to an Energy Shock (2023)
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:cpr:ceprdp:18557

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18557

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().