Nikolai Stähler
- 24 February 2026
- WORKING PAPER SERIES - No. 3192Details
- Abstract
- This paper presents a novel model comparison to examine the challenges posed by changes in carbon-intensive energy prices for monetary policy. The employed environmental monetary models have a detailed multi-sector structure. The comparison assesses the effects of both a temporary and a permanent energy price increase with a particular focus on the euro area and the United States. Temporary and permanent price shocks are both inflationary. However, the inflationary impact of the permanent shock depends on the underlying model assumptions and monetary policy response. The analysis also establishes that these models share large commonalities in their quantitative and qualitative results, while also pointing out cross-country differences.
- JEL Code
- C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
- 24 July 2020
- WORKING PAPER SERIES - No. 2450Details
- Abstract
- The paper reviews the economic risks associated with regimes of high public debt through DSGE model simulations. The large public debt build-up following the 2009 global financial and economic crisis acted as a shock absorber for output, while in the recent and more severe COVID19-crisis, an increase in public debt is even more justified given the nature of the crisis. Yet, once the crisis is over and the recovery firmly sets in, keeping debt at high levels over the medium term is a source of vulnerability in itself. Moreover, in the euro area, where monetary policy focuses on the area-wide aggregate, countries with high levels of indebtedness are poorly equipped to withstand future asymmetric shocks. Using three large scale DSGE models, the simulation results suggest that high-debt economies (1) can lose more output in a crisis, (2) may spend more time at the zero-lower bound, (3) are more heavily affected by spillover effects, (4) face a crowding out of private debt in the short and long run, (5) have less scope for counter-cyclical fiscal policy and (6) are adversely affected in terms of potential (long-term) output, with a significant impairment in case of large sovereign risk premia reaction and use of most distortionary type of taxation to finance the additional debt burden in the future. Going forward, reforms at national level, together with currently planned reforms at the EU level, need to be timely implemented to ensure both risk reduction and risk sharing and to enable high debt economies address their vulnerabilities.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
O40 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→General
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects