Oil shocks and the excise duty tax in a DSGE model setting

Črt Lenarčič

MPRA Paper from University Library of Munich, Germany

Abstract: This paper sets up a small open economy general equilibrium model operating in a monetary union. Exogenous oil-price shocks affecting the modelled economy are alleviated by introducing a pro-cyclical excise duty tax rule on oil prices. The paper provides a model-based theoretical background for studying a response of fiscal policy that is able to curb 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.

Keywords: Oil shocks; fiscal policy tax rule; DSGE model; inflation (search for similar items in EconPapers)
JEL-codes: E31 E32 E62 (search for similar items in EconPapers)
Date: 2018-11
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Published in Zagreb International Review of Economics & Business 2.21(2018): pp. 49-69

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:109982

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