Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279487 
Year of Publication: 
2023
Series/Report no.: 
DIW Discussion Papers No. 2056
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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.
Subjects: 
Energy crisis
Subsidies
Transfers
HANK 2
monetary union
spillovers
heterogeneity
inequality
households
JEL: 
D31
E64
F45
Q41
Document Type: 
Working Paper

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