Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309416 
Year of Publication: 
2025
Series/Report no.: 
IWH Discussion Papers No. 1/2025
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
We study the aggregate, distributional, and welfare effects of fiscal policy responses to Germany's energy crisis using a novel Ten-Agents New-Keynesian (TENK) model. The energy crisis, compounded by the COVID-19 pandemic, led to sharp increases in energy prices, inflation, and significant consumption disparities across households. Our model, calibrated to Germany's income and consumption distribution, evaluates key policy interventions, including untargeted and targeted transfers, a value-added tax cut, energy tax reductions, and an energy cost brake. We find that untargeted transfers had the largest short-term aggregate impact, while targeted transfers were most cost-effective in supporting lower-income households. Other instruments, as the prominent energy cost brake, yielded comparably limited welfare gains. These results highlight the importance of targeted fiscal measures in addressing distributional effects and stabilizing consumption during economic crises.
Subjects: 
DGE
energy crisis
fiscal policy
income distribution
TENK
JEL: 
E21
E62
Q43
Q48
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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