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Sectoral Shocks and the Role of Market Integration: The Case of Natural Gas

Author

Listed:
  • Silvia Albrizio
  • John Bluedorn
  • Christoffer Koch
  • Andrea Pescatori
  • Martin Stuermer

Abstract

We quantify how market integration affects the economic propagation of sectoral supply shocks at the example of a Russian gas shutoff to the European Union. An open-economy, multisector general equilibrium model suggests that the adverse output impact on the European Union shrinks fourfold if integration with the global liquified natural gas (LNG) market is considered. On the flip side, other LNG importers also see adverse output effects. Due to nonlinearities, the combined total economic damage is less than half with integration, compared to the counterfactual case without. Governments should foster further integration to make economies more resilient to supply shocks.

Suggested Citation

  • Silvia Albrizio & John Bluedorn & Christoffer Koch & Andrea Pescatori & Martin Stuermer, 2023. "Sectoral Shocks and the Role of Market Integration: The Case of Natural Gas," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 43-46, May.
    • Handle: RePEc:aea:apandp:v:113:y:2023:p:43-46
    DOI: 10.1257/pandp.20231045
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources

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