@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{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{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.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} } @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} }