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What is the difference between fossil fuel embargo and price shocks?

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  • Clemens, Marius
  • Röger, Werner

Abstract

In this paper, we model a fossil fuel embargo as a temporary quantity constraint on fossil fuel imports and we compare the impact with the effect of a fossil fuel price shock. We show that while both shocks have similar responses of output and inflation, they differ with respect to the reaction of other macroeconomic components, such as consumption, exports and the trade balance. In particular, an embargo has more adverse effects on the functional income distribution.

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  • Clemens, Marius & Röger, Werner, 2024. "What is the difference between fossil fuel embargo and price shocks?," Energy Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:eneeco:v:132:y:2024:i:c:s0140988324001270
    DOI: 10.1016/j.eneco.2024.107419
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    More about this item

    Keywords

    Energy prices; Embargo; General equilibrium model; Fiscal policy; Monetary policy;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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