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Oil shocks and the excise duty tax in a DSGE model setting

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  • Lenarčič, Črt

Abstract

This paper sets up a small open economy general equilibrium model operating in a monetary union. Exogenous oil-price shocks affecting the modelled economy are alleviated by introducing a pro-cyclical excise duty tax rule on oil prices. The paper provides a model-based theoretical background for studying a response of fiscal policy that is able to curb the negative effects of volatile global oil prices on inflation. Against this backdrop, we estimate the key parameters of the DSGE model and simulate different responses of the fiscal policy tax rule, based on different values of the responsiveness of the excise duty parameter.

Suggested Citation

  • Lenarčič, Črt, 2018. "Oil shocks and the excise duty tax in a DSGE model setting," MPRA Paper 109982, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109982
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    More about this item

    Keywords

    Oil shocks; fiscal policy tax rule; DSGE model; inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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