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A note on the role of monetary policy when natural gas supply is inelastic

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  • Weichenrieder, Alfons J.

Abstract

This note argues that in a situation of an inelastic natural gas supply a restrictive monetary policy in the euro zone could reduce the energy bill and therefore has additional merits. A more hawkish monetary policy may be able to indirectly use monopsony power on the gas market. The welfare benefits of such a policy are diluted to the extent that some of the supply (approximately 10 percent) comes from within the euro zone, which may give rise to distributional concerns.

Suggested Citation

  • Weichenrieder, Alfons J., 2022. "A note on the role of monetary policy when natural gas supply is inelastic," SAFE Working Paper Series 360, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:360
    DOI: 10.2139/ssrn.4233057
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    References listed on IDEAS

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    1. Gros, Daniel, 2022. "Optimal tariff versus optimal sanction: The case of European gas imports from Russia," CEPS Papers 36006, Centre for European Policy Studies.
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    More about this item

    Keywords

    energy crisis; monetary policy; natural gas;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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