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Energy prices, inflation and the ECB's monetary policy during the 2021-22 energy crisis

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  • Stefano Neri

    (Bank of Italy)

Abstract

Adverse shocks to energy prices exert a significant upward impact on euro area consumer prices and lead to a significant and protracted decline in economic activity. The shocks in 2021 and 2022 had a more pronounced and persistent impact on inflation than those in previous years, highlighting the existence of state-dependent effects. If the ECB had adopted a more restrictive monetary policy than implied by the actual policy rate and by the Eurosystem's balance sheet to offset the impact of the shocks on consumer prices, both real GDP and inflation would have been much lower in 2022. A response to inflation excluding energy prices could have reduced the negative impact on output.

Suggested Citation

  • Stefano Neri, 2025. "Energy prices, inflation and the ECB's monetary policy during the 2021-22 energy crisis," Temi di discussione (Economic working papers) 1481, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1481_25
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    References listed on IDEAS

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    More about this item

    Keywords

    energy price shocks; monetary policy; Bayesian VAR; local projections;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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