Abstract
IMF Country Report No. 22/290
Copyright Page
IMF Country Report No. 22/290
REPUBLIC OF ESTONIA
SELECTED ISSUES
September 2022
This Selected Issues paper on the Republic of Estonia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on August 8, 2022.
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Title page
REPUBLIC OF ESTONIA
SELECTED ISSUES
August 8, 2022
Approved By
European Department
Prepared by Bogdan Lissovolik and Neree Noumon. Assistance was provided by Rafaela Jarin, Kelly MacKinnon, and Sadhna Naik (all EUR).
Contents
RECENT DRIVERS OF INFLATION IN ESTONIA: A COMPARATIVE PERSPECTIVE WITH THE BALTICS AND EURO AREA
A. Introduction
B. Some Comparative Stylized Facts on Estonia’s Inflation
C. Analyzing the Global Commodity Price Passthrough
D. A More Holistic Analysis of Estonia’s Inflation
E. Assessing the Role of Wages in Driving Estonia’s Inflation
F. Conclusions and Policy Recommendations
FIGURES
1. Inflation and Inflation Expectations in the Baltics and the Euro Area 2021–22
2. Prices for Global Commodities and Products, 2020–22Q2
3. Inflation in the Baltics and the Euro Area, 2011–2022Q2
4. Energy Inflation in the Baltics and the Euro Area, 2021–2022
5. Food Price Inflation in the Baltics and the Euro Area, 2021–2022
6. Core Inflation in the Baltics and the Euro Area, 2021–2022
7. Passthrough from Global Prices to Headline and Core Inflation
TABLES
1. Comparative Passthrough from Global Prices to Headline HICP
2. Comparative Passthrough from Global Prices to Energy HICP
3. Comparative Passthrough from Global Prices to Food HICP
4. Regression Estimates from the Mark-up Model
5. Relationship Between Food CIP Components and Wage Growth
6. Relationship between Selected Services Prices and Wage Growth
References
CLIMATE POLICY IN ESTONIA: ACCELERATING MITIGATION IN THE TRANSPORT AND BUILDING SECTORS
A. Introduction
B. Estonia’s Climate Policy and Greenhouse Gas Emissions
C. Challenges to GHG Emissions Reduction in the Transport and Building Sectors
D. Climate Policies in the Transport and Building Sectors
E. Exploring the Costs and Benefits of Adopting a Carbon Tax in Non-ETS Sectors
F. Conclusion and Policy Recommendations
FIGURES
1. Climate Risks and Preparedness for Transition
2. Greenhouse Gas Emissions, 1990–2019
3. Transport GHG Emissions and Number of Passenger Cars
4. Passenger Cars Age and Emissions
5. GHG Emissions in the Building Sector
6. Building Energy Efficiency and Building Construction Year
7. Environment-Related Tax, Retail, and Efficient Fuel Prices
8. Illustrative Carbon Tax Trajectory and Related Co-Benefits
9. Distributional Effects of Carbon Taxation and Revenue, 2024–2035
10. Growth Impacts of Carbon Taxation, 2023–2030
References