Fiscal Policy and Energy Price Shocks
Blanz, A., Eydam, U., Heinemann, M., Kalkuhl, M., Moretti, N., published in Energy Policy, 2026
Abstract: In this analysis, we examine the heterogeneous welfare effects of various crisis relief programs, financed either through distortionary taxes or public debt. To provide a quantitative evaluation of the 2022 energy crisis, we compare the performance of targeted and untargeted transfers and energy price subsidies while considering different financing schemes within a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to the German economy. Our results show that no single measure can resolve the underlying trade-offs. In terms of welfare, low-income and high- income households prefer different policies and financing schemes. Low-income households prefer debt-financed instruments, as these help them smooth consumption in response to the energy price shock. In contrast, high-income households strongly prefer tax-financed interventions. Our analysis highlights the importance of labor market effects and explicitly assessing welfare.
Recommended citation: Blanz, Alkis, Ulrich Eydam, Maik Heinemann, Matthias Kalkuhl, and Nikolaj Moretti (2026). “Fiscal Policy and Energy Price Shocks”; Energy Policy. Vol. 212, 115149.