歐洲央行-能源價(jià)格沖擊、貨幣政策和不平等（英）

EUROPEANCENTRALBANK

EUROSYSTEM

WorkingPaperSeries

AlinaBobasu,MichaelDobrew,AmaliaRepeleEnergypriceshocks,monetarypolicyandinequality

No2967

Disclaimer:ThispapershouldnotbereportedasrepresentingtheviewsoftheEuropeanCentralBank(ECB).TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflectthoseoftheECB.

ECBWorkingPaperSeriesNo29671

Abstract

Westudyhowmonetarypolicyshapestheaggregateanddistributionaleffectsof

anenergypriceshock.Basedontheobservedheterogeneityinconsumptionexpo-surestoenergyandhouseholdwealth,webuildaquantitativesmallopen-economyHANKmodelthatmatchessalientfeaturesoftheEuroAreadata.Ourmodelin-corporatesenergyasbothaconsumptiongoodforhouseholdswithnon-homotheticpreferencesaswellasafactorinputintoproductionwithinputcomplementarities.

Independentlyofpolicyenergypriceshocksalwaysreduceaggregateconsumption.Householdswithlittlewealtharemoreadverselyaffectedthroughbothadeclineinlaborincomeaswellasnegativedirectpriceeffects.Activepolicyresponsesraisingratesinresponsetoinflationamplifiesaggregateoutcomesthroughareductioninaggregatedemand,butspeedsuptherecoverybyenablinghouseholdstorebuildwealththroughhigherreturnsonsavings.However,low-wealthhouseholdsarefur-theradverselyaffectedastheyhavelittlesavingstorebuildwealthfromandinsteadlooseduetofurtherdeclininglaborincome.

Keywords:energyprices,openeconomymodel,heterogeneousagents,monetarypolicy,non-homotheticpreferences.

JEL-Classification:E52,F41,Q43.

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Non-technicalsummary

Inthispaperweinvestigatetheaggregateanddistributionaleffectsofenergypriceshocksandhowtheyareshapedbymonetarypolicy.Basedontheobservedheterogeneityinhouseholdconsumptionexposurestoenergyandwealthpositions,webuildasmallopeneconomyhet-erogeneousagentNewKeynesian(HANK)modelcalibratedtoEuroAreadata.Ourmodelincorporatesenergyasbothaconsumptiongoodforhouseholdswithnon-homotheticprefer-encesaswellasafactorinputintoproductionwithinputcomplementarities.Allenergyusedinthedomesticeconomyhastobeimported.Wecontrast“passive”monetarypolicyresponsesthatkeeptherealinterestrate(nearly)constantwith“active”policyresponsesthatreacttoinflationbystronglyraisingtherealrate.

Ourmainfindingscanbesummarisedasfollows.First,energypriceincreasesadverselyaffectthedomesticeconomyregardlessofthemonetarypolicyresponse.Asallenergyhastobeimported,risingenergypriceseffectivelyconstituteatransferofwealthfromthedomestictotheforeigneconomy.Incontrasttoapassivepolicyresponse,anactivepolicyreactionraisingtherealratetofightinflationimpliesafourtimeslargerdeclineinaggregateconsumption.

Second,weshowthatthedriversoftheaggregateconsumptionresponsediffersubstantiallybetweenactiveandpassivemonetarypolicyresponses.Wedecomposetheaggregateconsump-tionresponseintothreecomponents,adirecteffectstemmingfromchangesintherealinterestrate,anindirecteffectresultingfromchangesinreallaborincome,andarelativepriceeffect.Underapassivepolicyresponse,four-fifthsoftheconsumptiondeclineisattributedtoindirectincomeeffects,whiletherestisdrivenbytherelativepriceeffect.Instarkcontrast,underanactivepolicyresponsethree-fourthsofthedeclineinconsumptionisexplainedbythedirectrealrateeffectandthereforedirectlyrelatedtomonetarypolicy.

Third,low-wealthhouseholdsaregenerallyaffectedthemostbyanenergypriceincrease.Absentanypolicyresponsethedeclineinconsumptionisthreetimeslargerforlow-relativetohigh-wealthhouseholds.Anactivepolicyresponseamplifiestheconsumptiondeclineforallhouseholds.Althoughtherelativedeclineislargerforwealthierhouseholds,theunderlyingdriversdifferstarkly.Low-wealthhouseholdshavetoreduceconsumptionbecauseofthefurtherdeclineinlaborincomeduetofallingeconomicactivity.Incontrast,high-wealthhouseholdschoosetoreducetheirconsumptionbecauseahigherrealrateincentivizesthemtosavemore.

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1Introduction

Energypriceshavereachedhistoricalheights,startingtheirriseinmid-2021aftermosteconomiesreopenedfromCOVID-19lockdownsandbeingcatalysedearly2022bytheRussianinvasionofUkraine.Figure

1

(leftpanel)showsthatrealenergypricesintheEuroAreahaverisenby60percentfromtheirlowsin2020andby30percentcomparedtotheiraverageoverthepast20years.Atthesametime,thetermsoftradedeterioratedwithnegativeimplicationsfordomesticpurchasingpower.DespitetheEuroAreabeinganenergyimporterfacinganexogenousshock,monetarypolicyreactedtotheenergypricesurgebyraisingratesatunprecedentedspeed.Theriseinenergypricesandsubsequentpolicyresponsenaturallyhaveheterogeneouseffectsonhouseholds,withlesswealthyhouseholdslikelybeingaffectedthemost.First,thesehouseholdsaremoreexposedtoenergypricesthroughtheirconsumptionbasketastheyspendalargerfractionoftheirincomeonenergy-relatedgoods(middlepanel).Second,theirlimitedsavingsmakesitdifficultforthemtosmooththeirconsumptioninresponsetotemporarypriceincreases(rightpanel)

.1

Third,low-wealthhouseholdsalmostsolelyrelyonlaborincomeanddonotbenefitfromhigherreturnsonsavings.

Figure1:Energyprices,termsoftrade,households’consumptionexposuresandsavingsacrosstheincomedistribution

permilleofconsumption

50

40

30

20

10

0

Energypricesandthetermsoftrade

130

120

110

100

90

2008

2010

2012

2014

2016

2018

2020

2022

2024

RealenergypricesTermsoftrade(rhs)

102

101

100

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98

Exposuretoenergyexpenditure

IIIIIIIVV

Incomequantiles

40

percentofdisposableincome

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20

10

0

Savings

IIIIIIIVV

Incomequantiles

Note:The“realenergyprice”indicatestheratiobetweentheenergycomponentoftheHICPandtheoverallHICPindex.ThetermsoftradeareproxiedbytheratiobetweentheGDPdeflatorandtheprivate

consumptiondeflator.Chartsinthemiddleandrightarebasedondistributionalstatisticsfromthe“Householdbudgetsurvey“andtheexperimental“Income,consumption,andwealth”datasetsprovidedbyEurostat.

Basedontheobservedheterogeneityinhouseholdconsumptionandwealth,webuildasmall

1Formoredetailsonsmalleradjustmentmarginsforlow-incomehouseholdsgiventheirconsumptionbasketandsavingspositions,seealso

HobijnandLagakos

(2005),

Bobasuetal.

(2023)and

BilsandAguiar

(2010)

.

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openeconomyheterogeneousagentNewKeynesian(HANK)modeltoanalysetheaggregateanddistributionaleffectsofenergypriceincreasesandhowtheseeffectsareshapedbymonetarypolicy.Weshowfirst,thatanenergypriceshockisalwaysrecessionaryinanopeneconomythatimportsallenergybecauseitconstitutesawealthtransferfromthedomestictotheforeigneconomy.Second,theinitialadverseaggregateeffectsaresmallerwhenmonetarypolicyremains“passive”,i.e.keepstherealrateconstant.“Active”monetarypolicyreactingtoinflationbyraisingtherealrateexacerbatestheinitialnegativeeffects,yetimpliesafasterrecovery.Bydecomposingtheaggregateconsumptionresponseweshowthatunderapassivepolicythenegativeeffectsofenergypriceshocksmainlyarisethroughnegativerealincomeeffects.Incontrast,underanactivepolicyconsumptiondeclinespredominantlyduetoarisingrealrateinsteadoftheshockitself.Third,low-wealthhouseholdsareaffectedthemostbyanenergypriceshock.Activepolicyexacerbatesnegativeeffectsforlow-wealthhouseholdsthroughafurtherdeclineinlaborincome,butbenefitshigh-wealthhouseholdsthroughhigherreturnsonsavings.

Inoursmallopeneconomymodelenergyfeaturesasbothaconsumptiongoodandafactorinputtoproduction.Allenergyusedinthedomesticeconomyhastobeimported.Householdshavenon-homotheticpreferencesoverenergyandnon-energygoodsmodelledasaStone-Gearyutilityfunction.Theyfaceidiosyncraticincomeriskthattheycanonlyimperfectlyinsureagainstduetoanoccasionallybindingborrowingconstraint.Firmsproducedomesticgoodsutilizinglaborandenergyasinputs,withlimitedsubstitutabilitybetweenthem.Whilepricesareflexibleweintroducestickywagesthroughlaborunions.WemodelmonetarypolicyasaTaylorrule,whichcanreacteithertocontemporaneousinflationmeasuresortheirforecasts.Thesemeasuresincludeheadlineinflation,definedasthechangeinaggregateprices,coreinflation,definedasthechangeindomesticgoodsprices,andenergypriceinflation.Wecontrasttheseruleswithabaselinepolicythatremainspassivebykeepingtherealrateconstant.

WecalibrateourmodeltodatafromtheEuroAreainordertoquantifytheaggregateanddistributionaleffectsofanenergypriceshock.Wetakeparticularcareinmatchingthehetero-geneityobservedinhouseholdconsumptionbaskets.InparticularweuseEurostat’s“Householdbudgetsurvey(HBS)”and“Income,wealthandconsumptionstatistics”(ICWS)tomatchanaveragehouseholdexpenditureonenergyofaround9percentandmatchthedegreeofnon-homotheticitytotargethigherenergyexpendituresofthelowestincomequintileofaround13percent.Additionally,wetargetanaverageaggregatemarginalpropensitytoconsumeofaround0.3deliveringsubstantialincomeandwealthheterogeneityinourmodel.Onthefirm

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side,wecalibratethedegreeofcomplementaritybetweenfactorinputstorecentestimatesin

Bachmannetal.

(2022)andadditionallytakeintoaccountinformationbasedoninput-output

tablesindicatingthattheenergyuseinproductionisnearlydoublethatofconsumption.

Westartbyillustratingtheimportanceofnon-homotheticpreferencesandinputcomplemen-taritiesfortheaggregateandindividualconsumptionandincomeresponsetoanenergypriceshockunderourbaselinepassivepolicy.Non-homotheticityimposesaconstraintonlow-wealthhouseholds,whileelasticitiesofsubstitutioninconsumptionandproductiongoverntheabilityofhouseholdsandfirmstorespondtotheshockinrelativeprices.Weshowthatlesswealthyhouseholdssufferalargerconsumptionexpenditureshockcomparedtowealthyhouseholds,therebyfurtherraisingtheiralreadyelevatedmarginalpropensitytoconsume(MPC).Whentheelasticityofsubstitutionacrossconsumptiongoodsislarge,theenergypriceshockislesssevereforallhouseholdsastheyareabletosubstituteawayfrommoreexpensiveenergygoodstowardscheaperdomesticgoods.Similarly,ahighelasticityofsubstitutionintheproductionfunctionallowsfirmstodecreasetheirdemandforenergyandthereforemitigatesthedeclineinlabordemand,predominantlybenefitinglow-wealthhouseholds.

Turningtotheaggregateeffectsofanenergypriceshockweshowthestrongdependenceonthemonetarypolicyresponse.Wecontrastabaselineinwhichmonetarypolicykeepstherealrateconstant,i.e.isfullypassive,topolicyruleswhichreacteithertocontemporaneousorforecastmeasuresofinflation.Inouropeneconomymodel,whereallenergyisimported,anenergypriceshockisalwaysrecessionaryregardlessofthepolicyresponse,asthebenefitsfromhigherenergypricessolelyaccruetotheforeigneconomy.Incontrasttothepassivebaseline,apolicyrespondingtoeithercontemporaneousheadlineorcoreinflationraisesrealinterestrates.Higherrealratesinturninduceastrongdeclineinconsumptionandoutputthatisfourtimesbiggerthanunderthebaseline.Rulesrespondingtoeitherforecastmeasuresofheadlineorcoreinflationinsteadeffectively“l(fā)ookthrough”theinitialenergypriceincrease.Realratesriseverylittleunderthese“passive”responses,therebyalleviatingmostofthenegativeeffectsonaggregatedemand.Inturn,thedeclineinbothconsumptionandlaborincomeislesspronouncedcomparedtothebaselinerulewithotherwiseverysimilarimplications.Respondingtoenergyinflationhasremarkablydifferentimplications.Undersuchapolicy,theincreaseintherealrateisthehighestwithaninitialcompletesuppressionofenergyandthereforeheadlineinflation.However,thiscomesatthecostofastrongrecessionthatisinitiallysignificantlylargerthanunderaheadlinerule.Additionally,completelycontaininginflationintheshorttermcomes

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atthecostofhigherinflationinthemedium-term,whenaspeedyrecoveryofdomesticgoodsdemandtogetherwithrisingforeigndemandultimatelyraisescoreandheadlineinflation.

Byanalyzingthedriversoftheaggregateconsumptionresponseweshowthatthenegativeeffectsofanenergypriceshockstemfromindirectnegativerealincomeeffectsbutarestronglyexacerbatedunderanactivepolicyresponsethroughdirectrealrateeffects.Wedecomposetheconsumptionresponseintoadirecteffectarisingfromchangesintherealinterestrate,anindirecteffectarisingfromchangesinlaborincomeandarelativepriceeffect.Thelattercapturesadeclineinconsumptionarisingfromtheenergypriceshock,causinghigherexpendituresonsubsistenceconsumptiontherebyleavingasmallershareofincomeforconsumptionbeyondthesubsistencelevel.Underafixedrealrate,four-fifthsandthereforethemajorityoftheconsumptiondeclineisduetoindirectincomeeffectswhereasonefourthisdrivenbytherelativepriceeffect.Sincemonetarypolicyispassive,therearenodirectrealrateeffects.Thisimpliesthattheadverseeffectsofanenergypriceshockworkpredominantlythroughareductioninrealincomewithanadditionalmarginforrisingcostsoftheconsumptionbasket.Instarkcontrast,underanactivepolicyresponse,three-fourthsofthedeclineinconsumptionisaccountedforbythedirecteffectandthereforedirectlyrelatedtotheriseintherealrate.Forecastrulesthataresufficientlypassivetriggeronlyasmallincreaseinrealrateswhichpositivelycontributestoaggregateconsumptionbyprovidinghigherreturnsonsavingswithoutadverseeffectsonaggregatedemandandthereforelaborincome.

Finally,weshowthatlow-wealthhouseholdsaregenerallyaffectedthemostbyanenergypriceshock.Absentanypolicyresponsethedeclineintheirconsumptionisthreetimeslargerrelativetohigh-wealthhouseholds.Anactivepolicyresponseamplifiestheconsumptionde-clineforallhouseholds.Althoughthisdeclineislargerforwealthierhouseholds,thedriveroftheunderlyingconsumptionstarklydifferbetweenlow-andhigh-wealthhouseholds.Low-wealthhouseholdshavetoreduceconsumptionbecauseofthestrongdeclineinlaborincome.Incontrast,wealthyhouseholdsoptimallychoosetoreducetheirconsumptionbecausehigherrealratesincentivizethemtosavemore.Forthesehouseholdspriceeffectsareimmaterialandlaborincomeeffectsarealotsmallerthanforlow-wealthhouseholds.Apassivepolicyresponseinsteaddoesnotinducea(strong)responseofrealratesandtherebydoesnotcauseastrongconsumptiondeclineforwealthyhouseholdsastheenergyshockitselfdoesnotsubstantiallyaf-fectthem.However,low-wealthhouseholdssubstantiallybenefitfromapassivepolicyresponsebecauseofthestronglymitigatedadverseeffectsonlaborincomeassociatedwithsuchapolicy.

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RelatedliteratureWerelatetothreemainstrandsoftheliteratureinvestigatingtheaggre-gateanddistributionaleffectsofenergyshocksinopeneconomymodels,includingtheimplica-tionsandpropagationmechanismsunderdifferentmonetarypolicyconducts.Thecoreanalysisbuildsonanestablishedbodyofliteraturewhichfocusesonthetransmissionofoilpriceshocks

inopen-economyrepresentative-agentmodels(Mendoza,

1995;

Kose,

2002

andmorerecently

BaqaeeandFarhi,

2019)includingtheappropriatemonetarypolicyresponse(Bodensteinetal.,

2011;

Natal,

2012)

.

BlanchardandGali

(2007)studythepropagationofoilpricesinanopen

economyrepresentativeagentmodel,byincludingoilintheproductionfunctioninordertoaccountfortheroleofintermediateproductionfactors.

Bernankeetal.

(1997)conductcounter

-factualmonetarypolicysimulationsandconcludethatmonetarypolicysignificantlyinfluencesthetransmissionofoilpriceshocksintheeconomy.

Bodensteinetal.

(2011)useaNewKeyne

-sianmodelwithoilinconsumptionandproductiontoexaminetheeffectsofdifferentmonetarypoliciesinresponsetoenergyshocks,bydistinguishingbetweencoreandheadlineinflation.Theauthorsfindanoptimalresponsetoanadverseenergysupplyshockinvolvesapersistentriseincoreandheadlineinflation.

Bodensteinetal.

(2013)usingthesamemodelfindthattheeffects

ofoilshocksonaggregatedemandarerathercushionedwhenmonetarypolicyisconstrainedbythezerolowerboundcomparedtonormaltimeswhenmonetarypolicyisunconstrained.

Natal

(2012)inanoptimalpolicydesignarguesthatpolicieswhichperfectlystabilizeprices

entailsignificantwelfarecosts.Weaddtothisliteraturebystudyingenergypriceshocksinasimilaropeneconomysettingbutwithafocusonhouseholdheterogeneitywhichallowsustoalsostudydistributionaleffectsofenergypriceshocksandhowtheyrelatetodifferentmonetarypolicyresponses.Morerecently,

GagliardoneandGertler

(2023)haveestimatedaNewKeyne

-sianmodelincorporatingoilandshowingthatstudyingoilpriceshocksandmonetarypolicycombinedprovidesagooddescriptionoftherecentaggregatedata.Whileallthesepapersfocusonaggregateoutcomes,

DelCantoetal.

(2023)notablydevelopanempiricalframeworktoan

-alyzetheimpactofinflationaryshocksthroughoutthedistribution,separatelystudyingenergyandmonetarypolicyshocks.Ourpapercanbeunderstoodasastructuralcounterparttotheirempiricalapproach,withafocusonhowtheeffectsofenergyshocksareshapedbymonetarypolicy.Despitethedifferencesinapproaches,wesimilarlyconcludethatenergypriceshocksaregenerallyregressiveandthatthemonetarypolicyresponsecanhaveasubstantialimpactinshapingtheseeffects.

Wealsorelatetoagrowingliteratureanalyzingthedomesticeffectsofshocksemergingin

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foreigneconomiesinthecontextofopen-economyheterogeneousagent(HA)models.

deFerra

etal.

(2020)quantifytheaggregateanddistributionaleffectsofcapitalflowreversalsinHungary,

whereagentsholddifferentamountsofforeigncurrencydebt.

Guoetal.

(2020)studythe

distributionaleffectsofinternationalshockswhenagentsdifferbytheirsectorofworkandtheirfinancialintegration,findingthatthesesourcesofheterogeneitycanplayamajorroleandcreatetrade-offsintheconductofmonetarypolicy.Otherrecentpapersstudyingtheredistributiveeffectsofexternalshocksinclude

Zhou

(2020),

Oskolkov

(2022)and

Otten

(2021)

.

Cugat

(2019)

introduceshouseholdheterogeneityinanopen-economyNewKeynesianmodelandstudyitsroleinthetransmissionofforeignshocks.

Auclertetal.

(2019)studymonetarytransmissionin

anopen-economyHANK,providinggeneralconditionsunderwhichhouseholds’heterogeneitymattersemphasizingthepresenceofastrongreal-incomechannelthatcanleadtocontractionarydevaluations.

Guntinetal.

(2020)showhowintroducinghouseholdheterogeneitycaninform

macroeconomictheoriesofaggregateconsumptionadjustmenttosuddenstops.Wecontributetothisliteraturebyexplicitlystudyingenergypriceshocksandtheiraggregateanddistributionalconsequencesaddingmonetarypolicyasasourceimpactingforeignshocks.

Third,wecontributetoanemergingliteraturestudyingenergyshocksinmacroeconomicmodelswithatleastsomedegreeofhouseholdheterogeneity.

Chanetal.

(2022)focusonthe

productionsidehighlightingthedemandspilloversarisingfrominputcomplementarityinatwo-agentNewKeynesianmodel.Theyshowthatahighercomplementarityleadstoastrongerdeclineinlabordemandhurtingconstrainedhouseholdsmoreandadditionallystudyoptimalpolicyinthissettingwithlimitedheterogeneity.Whilealsomodellinginputcomplementary,weinsteademphasizethedemandsideheterogeneityinbothconsumptionandincomeinafully-fledgedHANKmodelandcomparehowdifferentmonetarypolicyrulesbenefitorhurtdifferenthouseholdsalongtheincomedistribution.

Gornemannetal.

(2023)usingasimilar

twoagentmodelstudyhowsupplyshortagescanleadtoself-fulfillingfluctuationsandanalyzehowmonetarypolicycanremovedeterminacyrisks.Inarecentpaper,

Olivietal.

(2023)study

howmonetarypolicyshouldreacttoaggregateandsectoraldisruptionsinamulti-sectorNewKeynesianmodel.Theyfocusonananalyticalderivationoftwowedgesrelatedtoheteroge-neousconsumptionexpenditureswhenhouseholdshavenon-homotheticpreferencesandshowthatappliedtoUKdatathesewedgesarequantitativelyimportant.Wedifferfromtheirpa-perbyexplicitlymodellingenergyandconsideringshockstoenergypricesinsteadofaggregateproductivity.Asweshow,energypriceshockshaveconsiderablydifferentaggregateanddistri-

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butionalimplicationscomparedtoothersupplyshocks.Additionally,theirfocusontractableheterogeneityprecludesthemtofullystudydistributionaleffectsaswedoinourmodel.

Au-

dzeiandSut′oris

(2023)similarlyuseatractableheterogeneousagentmodel,albeitstudyingthe

incentivestoinvestinenergyabatementcapitalinresponsetoanenergypriceshock.Perhapstheclosestpaperstooursare

Auclertetal.

(2023)and

Pieroni

(2023)

.

Pieroni

(2023)builds

aclosedeconomyHANKmodeltostudyhowashocktoenergysupplyaffectsmacroeconomicoutcomes.Weinsteademployanopeneconomymodelandinnovatebyexplicitlystudyingdif-ferentmonetarypolicyrulesandhowtheyaffectbothaggregateanddistributionaloutcomes,alsostudyingthedriversofindividualconsumptionresponsesandhowtheydifferacrossthewealthdistribution.

Auclertetal.

(2023)similarlybuildanopeneconomyHANKmodelwith

differencesinthemodelsetup,e.g.abstractingfrominputcomplementaritiesinproduction.Theystudyhowtheinteractionoffiscalpolicyandmonetarypolicyspecifiedasanexogenousratepathcanmitigateenergypriceshocksalbeitsolelyfocusingonaggregateeffects.WeinsteadexplicitlystudydistributionaloutcomesandspecifymonetarypolicythroughamorecommonlyusedTaylorrulethatendogenouslyreactstoeithercontemporaneousorforecastmeasuresofinflation.

Theremainderofthepaperisorganisedasfollows.InSection

2

wepresentourtheoreticalmodelandinSection

3

wedescribethecalibrationandsteadystateofthemodel.Section

4

focusesontheimplicationsofanenergypriceshockinthecontextofdifferentmonetarypolicyframeworks,highlightingtheroleoftheelasticitiesofsubstitutioninconsumptionandproduction.Thesectionalsoexaminestheaggregateanddistributionaleffectsunderbothabaselinekeepingtherealratefixedandvariousactivepolicyrules.Finally,section

5

concludes.

2Model

InthissectionweintroduceasmallopeneconomyNewKeynesianmodelwithheterogeneoushouseholds.Energyfeaturesasbothaconsumptiongoodaswellasafactorinputtoproduction.Householdshavenon-homotheticpreferencesovernon-energyandenergygoodswithlesswealthyhouseholdsspendingalargershareoftheirincomeonenergy.Productionofnon-energygoodsrequireslaborandenergyasinputswhichcannotbeeasilysubstituted.Alaborunionflexiblysupplieslabortofirmschargingawageratethattheycanonlyinfrequentlychange,whereasgoodspricesareperfectlyflexible.Allenergyhastobeimportedfromabroadandwemodelan

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energycrisisasanexogenousshocktotheforeignpriceofenergy.

2.1Households

EnvironmentTheeconomyispopulatedbyacontinuumofhouseholdsofmeasureone.Householdsareinfinitely-livedandtimeisdiscrete.Thedomesticeconomyispartofacontin-uumofforeigncountriesdistributedovertheunitinterval,eachpopulatedbyarepresentativeforeignagen