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The impact of energy price increases on the Polish economy

Author

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  • Gradzewicz, Michał
  • Jabłonowski, Janusz
  • Sasiela, Michał
  • Żółkiewski, Zbigniew

Abstract

The aim of this paper is to assess the impact on the Polish economy of energy price shocks arising after the Russian invasion of Ukraine. We computed both the impact of the energy shocks (separately for gas, oil and coal prices) on the real side of the economy, and the pass-through of energy prices to the overall price level. The former part of the analysis was simulated using a computable general equilibrium (CGE) model of the Polish economy while the price effects of the shocks were simulated using a dual Leontief price model. Additionally, the price model was augmented with the mechanism of nominal wage adjustment suggested by the theory. This methodological novelty is our original contribution to empirical economics. Our simulations indicate that the price shock for all energy goods of the magnitude observed in 2022 resulted in a decrease in GDP of about 2.8% relative to the baseline solution. Moreover, we document a strong pro-inflationary effect of rising energy prices. After a combined shock to energy prices the consumption deflator increases by 10.3% (when we include the spreading the price increases across the industries), but the effect is simulated at 15.4%, when we account for an additional nominal wage adjustments (ensuring no real wage changes). We show that due to the differences in forward and backward propagation of shocks, the oil price shock had the strongest impact on real aggregates, whereas prices were hit the strongest by the gas price shock.

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  • Gradzewicz, Michał & Jabłonowski, Janusz & Sasiela, Michał & Żółkiewski, Zbigniew, 2024. "The impact of energy price increases on the Polish economy," Energy Economics, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:eneeco:v:140:y:2024:i:c:s0140988324006522
    DOI: 10.1016/j.eneco.2024.107944
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    Keywords

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    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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