Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316357 
Year of Publication: 
2025
Series/Report no.: 
ECONtribute Discussion Paper No. 361
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
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 calibrated to the euro area. Subsidies can stabilize the domestic economy, but they are fiscally costly and generate negative spillovers to the rest of the monetary union: What the subsidizing country gains, other countries lose. Transfers based on historical gas consumption in the form of a Slutsky compensation are less effective domestically than subsidies, but do not harm economic activity abroad. Moreover, transfers increase domestic welfare, while subsidies decrease it.
Subjects: 
Energy Crisis
Subsidies
Transfers
HANK2
Monetary Union
International Spillovers
Heterogeneity
Inequality
Households
JEL: 
D31
E64
F45
Q41
Document Type: 
Working Paper

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