The Macroeconomic and Redistributive Effects of Shielding Consumers from Rising Energy Prices: the French Experiment

French government implemented a subsidy on the purchase of energy products to shield consumers from rising energy prices during the energy crisis that started in 2021. We develop a new-Keynesian business cycle model with heterogeneous agents to assess the macroeconomic and redistributive effects of this energy subsidy. We propose a new methodology for ex-ante policy evaluation based on the government forecasts embedded in budgetary law. From a macroeconomic perspective, this policy supports economic growth and curbs inflation, but slightly rises debt-to-GDP ratio. In terms of redistribution, this policy contains the rise in consumption inequalities even if the subsidy is not targeted at poorest households. We compare the effects of this policy with alternative policies such as a re-indexation of wages on prices or a redistributive policy targeted at the most vulnerable households.