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Europe > Ukraine

You are looking at 1 - 10 of 11 items for :

  • Type: Journal Issue x
  • Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies x
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Cover IMF Working Papers
Shocked: Electricity Price Volatility Spillovers in Europe
Serhan Cevik
and
Yueshu Zhao
European electricity markets are in the midst of unprecedented changes—caused by Russia’s invasion of Ukraine and the rise of renewable sources of energy. Using high-frequency data, this paper investigates volatility spillovers across 24 countries in the European Union (EU) during the period 2014–2024 to provide a better understanding of the transmission of risks in an international context. We develop both a static and a dynamic assessment of spillover effects and directional decomposition between individual countries. Our main findings show that about 73 percent of the forecast error variation is explained by cross-variance shares, which means only 27 percent can be attributed to shocks within each country. In other words, cross-border volatility spillovers dominate the behavior in national electricity markets in Europe—and this effect has grown over time. We also implement an augmented gravity model of bilateral volatility spillovers across power markets in the EU. Altogether, these results provide important insights to policymakers and regulators with regards to greater integration of electricity markets and infrastructure improvements that would also help with the transition to low-carbon sources of power generation and strengthen energy security in Europe.
Keywords:
Electricity prices; Volatility; Spillovers; Gravity model; Renewable energy; Electricity market reform; Europe; volatility spillover; spillover effect; markets in the EU; electricity market; Electricity; Gravity models
Cover IMF Working Papers
Greenflation or Greensulation? The Case of Fuel Excise Taxes and Oil Price Pass-through
JaeBin Ahn
Can a carbon tax reduce inflation volatility? Focusing on fuel excise taxes, this paper provides systematic evidence on their role as a shock absorber that helps mitigating the impact of global oil price shocks on domestic inflation. Exploiting substantial variation in fuel tax rates across 28 OECD countries over the period from 2014 to 2021, a simple idea that a per-unit, specific tax takes up a portion of the product price immune to cost shocks goes a long way toward explaining heterogeneity in the degree of oil price pass-through into domestic inflation across countries. A back-of-the-envelope calculation from the estimation results supports its quantitative significance---differences in fuel tax rates could explain about 30% of the variation in annual headline CPI inflation rates observed between the U.S. and U.K. during the 2021 inflation surge.
Keywords:
Fuel excise tax; gasoline tax; diesel tax; oil price pass-through; retail fuel price; inflation; greenflation; greensulation; inflation volatility; headline CPI inflation rates; oil price shock; back-of-the-envelope calculation; Oil prices; Fuel tax; Fuel prices; Excises; Global
Cover IMF Working Papers
Carbon Prices and Inflation in the Euro Area
Maximilian Konradt
,
Thomas McGregor
, and
Frederik G Toscani
What is the effect of carbon pricing on inflation? This paper shows empirically that the consequences of the European Union’s Emission Trading System (ETS) and national carbon taxation on inflation have been limited in the euro area, so far. This result is supported by analysis based on a panel local projections approach, as well as event studies based on individual countries. Our estimates suggest that carbon taxes raised the price of energy but had limited effects on overall consumer prices. Since future climate policy will need to be much more ambitious compared to what has been observed so far, including the need for larger increases in carbon prices, possible non-linearities might make extrapolating from historical results difficult. We thus also use input-output tables to simulate the mechanical effect of a carbon tax consistent with the EU’s ‘Fit-for-55’ commitments on inflation. The required increase of effective carbon prices from around 40 Euro per ton of CO2 in 2021 to around 150 Euro by 2030 could raise annual euro area inflation by between 0.2 and 0.4 percentage points. It is worth noting that the energy price increases caused by the rise in the effective carbon price to 150 Euro is substantially smaller than the energy price spike seen in 2022 following the invasion of Ukraine.
Keywords:
Green transition; carbon taxes; climate policy; inflation; energy price spike; EU ETS price; European Union's Emission Trading System; headline inflation; EU ETS; price level; Carbon tax; Greenhouse gas emissions; Consumer prices; Europe; Global
Cover IMF Working Papers
Energy Support for Firms in Europe: Best Practice Considerations and Recent Experience
Mr. Anil Ari
,
Philipp Engler
,
Gloria Li
,
Manasa Patnam
, and
Ms. Laura Valderrama
The surge in energy prices due to Russia’s February 2022 invasion of Ukraine significantly increased costs for European firms, prompting governments to introduce a range of support schemes. Although energy prices had eased by early 2023, uncertainty around prices remains unusually large. Against this backdrop, this paper examines the case for government intervention and identifies best practices with a view to improving the design of existing energy support schemes, facilitating exit from those schemes, and preparing policymakers for a downside scenario in which energy prices flare up again. The paper argues that support should be limited in size, strictly temporary in nature, narrowly targeted, and accompanied by strong safeguards and conditionality, while preserving price signals as much as possible to encourage energy conservation. Finally, the paper reviews recent support schemes introduced by European governments in light of the identified best practice considerations.
Keywords:
Energy prices; energy subsidies; financial support; price caps; energy crisis; Russia’s invasion of Ukraine; energy support scheme; price signal; best practice consideration; Annex II; support scheme; Energy pricing; Energy conservation; Fuel prices; Solvency; Europe
Cover IMF Staff Country Reports
Republic of Poland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper focuses on balancing decarbonization with energy security in Poland. The paper describes the evolution and challenges related to the energy security situation and greenhouse gas (GHG) emissions in Poland over the last decades in the context of EU climate agenda. It also analyzes possible decarbonization paths and implications for energy import dependency. Despite increasing consumption of imported fossil fuels, Poland has managed to decouple economic growth from carbon emissions. The energy dependency of Poland is well below the EU average, due to a high reliance on domestic coal, which accounts for 72 percent of coal-fired power generation. The Poland-specific policy scenarios assume significant changes in the electricity mix and varying degrees of decarbonization ambition. Economic outcomes, in particular for employment, depend on how carbon tax receipts are spent. The objectives of energy security and decarbonization can be aligned. Fossil fuel imports are the main source of risk for energy security, while also being responsible for almost half of energy-related CO2 emissions. Policies to shift away from these fuels will benefit both climate mitigation and energy security. While decarbonizing the power sector will not directly contribute to energy security, it can be achieved without endangering it.
Keywords:
GHG emission reduction; impulse response; decarbonization scenario; monetary policy ANALYSIS; monetary policy scenario; Greenhouse gas emissions; Carbon tax; Inflation; Output gap; Europe; Global
Cover IMF Working Papers
Policy Responses to High Energy and Food Prices
David Amaglobeli
,
Mengfei Gu
,
Emine Hanedar
,
Mr. Gee Hee Hong
, and
Celine Thevenot
The surge in energy and food prices, which was amplified by Russia’s invasion of Ukraine, has prompted a flurry of policy responses by countries during 2022. The aim of these policy responses was to mitigate social and economic impact of higher prices. In this paper we document announcements of policy measures based on the Database of Energy and Food Price Actions (DEFPA), which was developed based on two rounds of survey responses of IMF country teams conducted in March/April and June/July of 2022. The paper also provides discussion on policy trade-offs when considering appropriate policy responses both for countries with strong and weak social safety nets. Key policy message is that providing targeted support to households in the form of cash transfers is the most cost-effective way of alleviating the burden on vulnerable households and have to be preferred over broad-based mechanisms that prevent international prices to pass through to domestic consumers.
Keywords:
Energy prices; food Prices; cost of living; social policy; IMF country team; demand and supply response; A. pass-through; Policy measure
Cover World Economic Outlook, October 2022
World Economic Outlook, October 2022
International Monetary Fund. Research Dept.

Abstract

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.

Keywords:
growth; growth outlook; global recession; adverse scenario; output gap; output losses; COVID-19; pandemic; scarring; inflation; core inflation; inflation expectations; monetary policy; financial conditions; debt distress; sovereign spreads; fiscal policy; disinflation; food and energy prices; Russian gas supplies; pandemic; war in Ukraine; current account; dollar strength; capital flows; China real estate sector; fragmentation; multilateral cooperation; climate change; climate policies; Wages; wage dynamics; wage-price spirals; inflation; labor markets; expectations; monetary policy; interest rates; nominal wages; real wages; unemployment; tightness; supply-demand imbalances; COVID-19; pandemic; recovery; de-anchoring; Phillips curve; pass-through; demand shocks; supply shocks; supply-chain shocks; sectoral shocks; monetary policy shocks; cost-push shocks; expectations formation; rational expectations; adaptive expectations; adaptive learning; historical episodes; advanced economies; emerging market economies; climate policy; monetary policy; inflation; energy transition; carbon pricing; macroeconomic model; GMMET; output-inflation tradeoff; GHG taxes; green subsidies; green investment; inflation expectation; price inflation; wage-price spiral; wage growth; headline inflation; Carbon tax; Greenhouse gas emissions; Global; Europe; Caribbean; Middle East and Central Asia; Africa
Cover IMF Staff Country Reports
Republic of Estonia: Selected Issues
International Monetary Fund. European Dept.
Selected Issues
Keywords:
food price inflation; commodity price Passthrough; transport GHG emission; GHG emissions reduction; inflation expectation; headline HICP; Greenhouse gas emissions; Inflation; Carbon tax; Commodity prices; Global; Baltics; Europe
Cover External Sector Report 2022
External Sector Report 2022
International Monetary Fund. Research Dept.

Abstract

Global current account balances—the overall size of current account deficits and surpluses—continued to widen in 2021 to 3.5 percent of world GDP, and are expected to widen again this year. The IMF’s multilateral approach suggests that global excess balances narrowed to 0.9 percent of world GDP in 2021 compared with 1.2 percent of world GDP in 2020. The pandemic has continued to affect economies’ current account balances unevenly through the travel and transportation sectors as well as a shift from services to goods consumption. Commodity prices recovered from the COVID-19 shock and started rising in 2021 with opposite effects on the external position of exporters and importers, a trend that the war in Ukraine is exacerbating in 2022. The medium-term outlook for global current account balances is a gradual narrowing as the impact of the pandemic fades away, commodity prices normalize, and fiscal consolidation in current account deficit economies progresses. However, this outlook is highly uncertain and subject to several risks. Policies to promote external rebalancing differ with positions and needs of individual economies.

Keywords:
current account response; IMF staff calculation; CA gap; CA surplus; saving-investment relationship; Current account; Carbon tax; Real effective exchange rates; Current account balance; Global; Europe; Africa
Cover IMF Staff Country Reports
Singapore: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Singapore
International Monetary Fund. Asia and Pacific Dept
This 2022 Article IV Consultation discusses that Singapore’s skillful containment measures, effective vaccination campaign and decisive policy support helped the economy to recover impressively. Growth is expected to remain above potential in the near term and broaden across sectors, supported by widespread vaccinations and pent-up demand as the economy reopens. The tight macroprudential stance should be maintained, and further tightened as needed. This combined with the authorities’ plans to ramp up housing supply would help ensure a soft landing in residential real estate prices and prevent a further rise of systemic financial risks. Should downside risks materialize, Singapore can continue to deploy its ample fiscal buffers to cushion the economic impact, with targeted fiscal support continuing to be the first line of defense. The authorities are pivoting to post-pandemic and longer term priorities. Recent initiatives, included as part of the FY2022 budget, to accelerate transition toward a smarter, greener, and more inclusive economy post-pandemic are welcome.
Keywords:
core inflation; money market rate; Singapore economy; bond issuance; currency speculation; inflation momentum; policy support; Singapore dollar; Inflation; COVID-19; Climate change; Carbon tax; Global; Fiscal stance