A note on the role of monetary policy when natural gas supply is inelastic

Alfons Weichenrieder

No 360, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This note argues that in a situation of an inelastic natural gas supply a restrictive monetary policy in the euro zone could reduce the energy bill and therefore has additional merits. A more hawkish monetary policy may be able to indirectly use monopsony power on the gas market. The welfare benefits of such a policy are diluted to the extent that some of the supply (approximately 10 percent) comes from within the euro zone, which may give rise to distributional concerns.

Keywords: energy crisis; monetary policy; natural gas (search for similar items in EconPapers)
JEL-codes: E52 Q31 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eec, nep-ene and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:360

DOI: 10.2139/ssrn.4233057

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