The impact of permanent energy price shocks on the UK economy
This paper outlines the properties of one of the models used at the Bank of England for analysing the impact of energy prices on the UK economy. We build a dynamic general equilibrium model that includes a variety of channels through which energy prices affect demand and supply. On the demand side we model household consumption of final energy goods (petrol and utilities) separately from other goods and services. On the supply side, we model the production of final energy goods and the way that they enter the production process of other goods and services. We calibrate the model using UK data and examine how the various channels in the model contribute to the responses to permanent energy price shocks of a similar magnitude to those observed in the recent data. We show the effects of such shocks have important implications for monetary policy.
|Date of creation:||26 Jul 2011|
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International Finance Discussion Papers
897, Board of Governors of the Federal Reserve System (U.S.).
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"The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?,"
NBER Working Papers
13368, National Bureau of Economic Research, Inc.
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- Millard, Stephen, 2011. "An estimated DSGE model of energy, costs and inflation in the United Kingdom," Bank of England working papers 432, Bank of England.
- repec:cup:cbooks:9780521192828 is not listed on IDEAS
- Finn, Mary G, 2000. "Perfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 400-416, August.
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