LEADER 04195cam a22007574i 4500001 99131106231906421 005 20240731073706.0 006 m o d 008 020129s2024 dcu o i00 0 eng d 020 979-84-00-27346-9 035 (CKB)5470000003738467 035 (IMF)WPIEA2024081 035 (EXLCZ)995470000003738467 040 DcWaIMF |beng |erda 100 1 Erceg, Christopher. 245 10 Can Energy Subsidies Help Slay Inflation? / |cChristopher Erceg, Marcin Kolasa, Jesper Lindé, Andrea Pescatori. 264 1 Washington, D.C. : |bInternational Monetary Fund, |c2024. 300 1 online resource (79 pages) 336 text |btxt |2rdacontent 337 computer |bc |2rdamedia 338 online resource |bcr |2rdacarrier 490 1 IMF Working Papers 520 3 Many countries have used energy subsidies to cushion the effects of high energy prices on households and firms. After documenting the transmission of oil supply shocks empirically in the United States and the Euro Area, we use a New Keynesian modeling framework to study the conditions under which these policies can curb inflation. We first consider a closed economy model to show that a consumer subsidy may be counterproductive, especially as an inflation-fighting tool, when applied globally or in a segmented market, at least under empirically plausible conditions about wage-setting. We find more scope for energy subsidies to reduce core inflation and stimulate demand if introduced by a small group of countries which collectively do not have much influence on global energy prices. However, the conditions under which consumer energy subsidies reduce inflation are still quite restrictive, and this type of policy may well be counterproductive if the resulting increase in external debt is high enough to trigger sizeable exchange rate depreciation. Such effects are more likely in emerging markets with shallow foreign exchange markets. If the primary goal of using fiscal measures in response to spikes in energy prices is to shield vulnerable households, then targeted transfers are much more efficient as they achieve their goals at lower fiscal cost and transmit less to core inflation. 588 Description based on print version record. 650 7 Business Fluctuations |2imf 650 7 Currency crises |2imf 650 7 Cycles |2imf 650 7 Deflation |2imf 650 7 Economic & financial crises & disasters |2imf 650 7 Economics of specific sectors |2imf 650 7 Economics |2imf 650 7 Economics: General |2imf 650 7 Energy and the Macroeconomy |2imf 650 7 Energy industries & utilities |2imf 650 7 Energy prices |2imf 650 7 Energy pricing |2imf 650 7 Energy subsidies |2imf 650 7 Energy: Demand and Supply |2imf 650 7 Environmental Taxes and Subsidies |2imf 650 7 Expenditure |2imf 650 7 Expenditures, Public |2imf 650 7 Government subsidies |2imf 650 7 Incomes Policy |2imf 650 7 Inflation |2imf 650 7 Informal sector |2imf 650 7 Macroeconomics |2imf 650 7 Monetary Policy |2imf 650 7 National Government Expenditures and Related Policies: General |2imf 650 7 Price Level |2imf 650 7 Price Policy |2imf 650 7 Prices |2imf 650 7 Public finance & taxation |2imf 650 7 Public Finance |2imf 650 7 Redistributive Effects |2imf 650 7 Subsidies |2imf 650 7 Taxation and Subsidies: Externalities |2imf 776 |z979-84-00-27344-5 700 1 Kolasa, Marcin. 700 1 Lindé, Jesper. 700 1 Pescatori, Andrea. 830 0 IMF Working Papers; Working Paper ; |vNo. 2024/081 906 BOOK