Energy supply shocks' nonlinearities on output and prices

Arbeitspapier

We use a Bayesian Threshold Vector Autoregression model identified through sign and narrative restrictions to uncover non-linearities in the propagation of energy supply shocks. We find that the transmission of energy supply shocks on consumer prices is stronger in high-inflation regimes, supporting nonlinear models. The faster pass-thorough of energy supply shocks to consumer prices (excl. energy) cushions the drop in output in the short term. Energy supply shocks have a stronger impact on output in the medium-term with manufacturing being more adversely affected than GDP. Large energy supply shocks shift the economy to another state but after two and half years the mean-reversion to lower inflation implies a more moderate transmission mechanism, highlighting the importance of state-dependent impulse responses. The energy supply shocks between July 2021 and June 2022 are massive amounting to 3.9 standard deviations on average each month.

Object Details

• ISBN: 978-92-899-6119-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2834

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Business Fluctuations; Cycles
• Subject: Business cycles ; energy shocks ; non-linearities ; TVAR ; narrative identification

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): De Santis, Roberto A. ; Tornese, Tommaso
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2023

Further information

• DOI: doi:10.2866/610849
• Handle: http://hdl.handle.net/10419/278666
• Last update: 10.03.2025, 11:41 AM CET