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The Macroeconomic Effects of the Energy Price Cap: An Evaluation Conducted Using the ThreeME Multisectoral Model

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  • Paul Malliet
  • Anissa Saumtally

Abstract

[eng] The energy crisis that struck Europe in 2021 as the world bounced back from COVID, and amplified by the Russian invasion of Ukraine, led to a sharp increase in energy prices, particularly gas prices. In this context, European nations implemented emergency measures to protect households’ purchasing power and the competitiveness of their businesses. France chose to mitigate energy price rises by implementing a price cap. Making use of a computable general equilibrium model, we explicitly simulate the divergent trajectories of energy prices with and without this price cap. Our results show that the budgetary cost of this measure was lower than initially expected, and while the macroeconomic impact was also relatively small, it did nonetheless preserve household purchasing power.

Suggested Citation

  • Paul Malliet & Anissa Saumtally, 2025. "The Macroeconomic Effects of the Energy Price Cap: An Evaluation Conducted Using the ThreeME Multisectoral Model," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 547, pages 21-47.
    • Handle: RePEc:nse:ecosta:ecostat_2025_547_3
    DOI: https://doi.org/10.24187/ecostat.2025.547.2137
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    1. Mr. Anil Ari & Mr. Nicolas Arregui & Mr. Simon Black & Oya Celasun & Ms. Dora M Iakova & Ms. Aiko Mineshima & Mr. Victor Mylonas & Ian W.H. Parry & Iulia Teodoru & Karlygash Zhunussova, 2022. "Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels," IMF Working Papers 2022/152, International Monetary Fund.
    2. Langot, François & Malmberg, Selma & Tripier, Fabien & Hairault, Jean-Olivier, 2023. "The Macroeconomic and Redistributive Effects of Shielding Consumers from Rising Energy Prices: the French Experiment," CEPREMAP Working Papers (Docweb) 2305, CEPREMAP.
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