@techreport{EydamLeupold2023, type = {Working Paper}, author = {Eydam, Ulrich and Leupold, Florian}, title = {What is it good for?}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {65}, issn = {2628-653X}, doi = {10.25932/publishup-59796}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-597966}, pages = {37}, year = {2023}, abstract = {Military conflicts and wars affect a country's development in various dimensions. Rising inflation rates are a potentially important economic effect associated with conflict. High inflation can undermine investment, weigh on private consumption, and threaten macroeconomic stability. Furthermore, these effects are not necessarily restricted to the locality of the conflict, but can also spill over to other countries. Therefore, to understand how conflict affects the economy and to make a more comprehensive assessment of the costs of armed conflict, it is important to take inflationary effects into account. To disentangle the conflict-inflation-nexus and to quantify this relationship, we conduct a panel analysis for 175 countries over the period 1950-2019. To capture indirect inflationary effects, we construct a distance based spillover index. In general, the results of our analysis confirm a statistically significant positive direct association between conflicts and inflation rates. This finding is robust across various model specifications. Moreover, our results indicate that conflict induced inflation is not solely driven by increasing money supply. Furthermore, we document a statistically significant positive indirect association between conflicts and inflation rates in uninvolved countries.}, language = {en} } @techreport{Eydam2021, type = {Working Paper}, author = {Eydam, Ulrich}, title = {The Distributional Implications of Climate Policies Under Uncertainty}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {33}, issn = {2628-653X}, doi = {10.25932/publishup-50895}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-508950}, pages = {53}, year = {2021}, abstract = {Promoting the decarbonization of economic activity through climate policies raises many questions. From a macroeconomic perspective, it is important to understand how these policies perform under uncertainty, how they affect short-run dynamics and to what extent they have distributional effects. In addition, uncertainties directly associated with climate policies, such as uncertainty about the carbon budget or emission intensities, become relevant aspects. We study the implications of emission reduction schemes within a Two-Agent New-Keynesian (TANK) model. This quantitative exercise, based on data for the German economy, provides various insights. In the light of frictions and fluctuations, compared to other instruments, a carbon price (i.e. tax) is associated with lower volatility in output and consumption. In terms of aggregate welfare, price instruments are found to be preferable. Conditional on the distribution of revenues from climate policies, quantity instruments can exert regressive effects, posing a larger economic loss on wealth-poor households, whereas price instruments are moderately progressive. Finally, we find that unexpected changes in climate policies can induce substantial aggregate adjustments. With uncertainty about the carbon budget, the costs of adjustment are larger under quantity instruments.}, language = {en} } @techreport{BlanzEydamHeinemannetal.2022, type = {Working Paper}, author = {Blanz, Alkis and Eydam, Ulrich and Heinemann, Maik and Kalkuhl, Matthias}, title = {Optimal carbon pricing with fluctuating energy prices — emission targeting vs. price targeting}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {51}, issn = {2628-653X}, doi = {10.25932/publishup-56104}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-561049}, pages = {12}, year = {2022}, abstract = {Prices of primary energy commodities display marked fluctuations over time. Market-based climate policy instruments (e.g., emissions pricing) create incentives to reduce energy consumption by increasing the user cost of fossil energy. This raises the question of whether climate policy should respond to fluctuations in fossil energy prices? We study this question within an environmental dynamic stochastic general equilibrium (E-DSGE) model calibrated on the German economy. Our results indicate that the welfare implications of dynamic emissions pricing crucially depend on how the revenues are used. When revenues are fully absorbed, a reduction in emissions prices stabilizes the economy in response to energy price shocks. However, when revenues are at least partially recycled, a stable emissions price improves overall welfare. This result is robust to different modeling assumptions.}, language = {en} } @article{ClemensEydamHeinemann2023, author = {Clemens, Marius and Eydam, Ulrich and Heinemann, Maik}, title = {Inequality over the business cycle: the role of distributive shocks}, series = {Macroeconomic dynamics}, volume = {27}, journal = {Macroeconomic dynamics}, number = {3}, publisher = {Cambridge University Press}, address = {Cambridge}, issn = {1365-1005}, doi = {10.1017/S1365100521000523}, pages = {571 -- 600}, year = {2023}, abstract = {This paper examines how wealth and income inequality dynamics are related to fluctuations in the functional income distribution over the business cycle. In a panel estimation for OECD countries between 1970 and 2016, although inequality is, on average countercyclical and significantly associated with the capital share, one-third of the countries display a pro- or noncyclical relationship. To analyze the observed pattern, we incorporate distributive shocks into an RBC model, where agents are ex ante heterogeneous with respect to wealth and ability. We find that whether wealth and income inequality behave countercyclically or not depends on the elasticity of intertemporal substitution and the persistence of shocks. We match the model to quarterly US data using Bayesian techniques. The parameter estimates point toward a non-monotonic relationship between productivity and inequality fluctuations. On impact, inequality increases in response to TFP shocks but subsequently declines. Furthermore, TFP shocks explain 17\% of inequality fluctuations.}, language = {en} } @article{EydamQualo2023, author = {Eydam, Ulrich and Qualo, Hannes}, title = {Income inequality and taxes}, series = {Applied economics letters}, journal = {Applied economics letters}, publisher = {Routledge}, address = {Abingdon}, issn = {1350-4851}, doi = {10.1080/13504851.2023.2208328}, pages = {1 -- 8}, year = {2023}, abstract = {Economic literature offers several distinct explanations for the raising income inequality observed in several countries. In the debate about the causes of inequality a growing strand of research focuses on the effects of taxation on income inequality. We contribute to this literature by providing a systematic empirical account of the relationship between income inequality and personal income taxation (PIT) for a set of countries over the period 1981-2005. In order to take alternative explanations into account and to isolate the effects of tax progressivity, we include a wide range of control variables. We address potential reverse causality between inequality and PIT by using the variation in tax schedules of neighbouring countries. Our results confirm a statistically significant negative association between the progressivity of PIT and income inequality. Overall, we find that especially the average and the marginal tax rate have the potential to reduce income inequality. This finding is qualitatively robust across various different empirical specifications.}, language = {en} } @techreport{EydamDiluiso2022, type = {Working Paper}, author = {Eydam, Ulrich and Diluiso, Francesca}, title = {How to Redistribute the Revenues from Climate Policy?}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {45}, issn = {2628-653X}, doi = {10.25932/publishup-54896}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-548960}, pages = {32}, year = {2022}, abstract = {In light of climate change mitigation efforts, revenues from climate policies are growing, with no consensus yet on how they should be used. Potential efficiency gains from reducing distortionary taxes and the distributional implications of different revenue recycling schemes are currently debated. To account for households heterogeneity and dynamic trade-offs, we study the macroeconomic and welfare performance of different revenue recycling schemes using an Environmental Two-Agent New-Keynesian model, calibrated on the German economy. We find that, in the long run, welfare gains are higher when revenues are used to reduce distortionary taxes on capital, but this comes at the cost of higher inequality: while all households prefer labor income tax reductions to lump-sum transfers, only financially unconstrained households are better off when reducing taxes on capital income. Interestingly, we find that over the transition period relevant to meet short-medium run climate targets, labor income tax cuts are the most efficient and equitable instrument.}, language = {en} } @techreport{BlanzEydamHeinemannetal.2023, type = {Working Paper}, author = {Blanz, Alkis and Eydam, Ulrich and Heinemann, Maik and Kalkuhl, Matthias and Moretti, Nikolaj}, title = {Fiscal Policy and Energy Price Shocks}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {70}, issn = {2628-653X}, doi = {10.25932/publishup-61276}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-612763}, pages = {33}, year = {2023}, abstract = {The effects of energy price increases are heterogeneous between households and firms. Financially constrained poorer households, who spend a larger relative share of their income on energy, are particularly affected. In this analysis, we examine the macroeconomic and welfare effects of energy price shocks in the presence of credit-constrained households that have subsistence-level energy demand. Within a Dynamic Stochastic General Equilibrium (DSGE) model calibrated for the German economy, we compare the performance of different policy measures (transfers and energy subsidies) and different financing schemes (income tax vs. debt). Our results show that credit-constrained households prefer debt over tax financing regardless of the compensation measure due to their difficulty to smooth consumption. On the contrary, rich households tend to prefer tax-financed measures as they increase the labor supply of poor households. From an aggregate perspective, tax-financed measures targeting firms effectively cushion aggregate output losses.}, language = {en} } @article{CoviEydam2020, author = {Covi, Giovanni and Eydam, Ulrich}, title = {End of the sovereign-bank doom loop in the European Union?}, series = {Journal of evolutionary economics}, volume = {30}, journal = {Journal of evolutionary economics}, number = {1}, publisher = {Springer}, address = {Berlin ; Heidelberg ; New York}, issn = {0936-9937}, doi = {10.1007/s00191-018-0576-2}, pages = {5 -- 30}, year = {2020}, abstract = {In this paper we examine the relationship between the default risk of banks and sovereigns, i.e. the 'doom-loop'. Specifically, we try to assess the effectiveness of the implementation of the new recovery and resolution framework in the European Union. We use a panel with daily data on European banks and sovereigns ranging from 2012 to 2016 in order to test the effects of the Bank Recovery and Resolution Directive on the two-way feedback process. We find that there was a pronounced feedback loop between banks and sovereigns from 2012 to 2014. However, after the implementation of the European Banking Union, in 2015/2016, the magnitude of the doom-loop decreased and the spillovers became not statistically significant. Furthermore, our results suggest that the implementation of the new resolution framework is a suitable candidate to explain this finding. Overall, the results are robust across several specifications.}, language = {en} } @article{CoviEydam2020, author = {Covi, Giovanni and Eydam, Ulrich}, title = {Correction to: End of the sovereign-bank doom loop in the European Union?}, series = {Journal of evolutionary economics}, volume = {30}, journal = {Journal of evolutionary economics}, number = {1}, publisher = {Springer}, address = {New York}, issn = {0936-9937}, doi = {10.1007/s00191-018-0577-1}, pages = {31 -- 38}, year = {2020}, language = {en} }