Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278666 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2834
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We use a Bayesian Threshold Vector Autoregression model identified through sign and narrative restrictions to uncover non-linearities in the propagation of energy supply shocks. We find that the transmission of energy supply shocks on consumer prices is stronger in high-inflation regimes, supporting nonlinear models. The faster pass-thorough of energy supply shocks to consumer prices (excl. energy) cushions the drop in output in the short term. Energy supply shocks have a stronger impact on output in the medium-term with manufacturing being more adversely affected than GDP. Large energy supply shocks shift the economy to another state but after two and half years the mean-reversion to lower inflation implies a more moderate transmission mechanism, highlighting the importance of state-dependent impulse responses. The energy supply shocks between July 2021 and June 2022 are massive amounting to 3.9 standard deviations on average each month.
Subjects: 
Business cycles
energy shocks
non-linearities
TVAR
narrative identification
JEL: 
C32
E32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6119-6
Document Type: 
Working Paper

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