Thread by @kuhnmo

"What are the macroeconomic & distributional consequences for Germany of a stop of Russian energy imports?" Our @EContribute policy brief provides an answer
@BachmannRudi @DBaqaee @christianbaye13 @kuhnmo @andreasloeschel @ben_moll @APeichl #KarenPittel @MSchularick

Our answer: Consequences are severe but seem manageable. How severe? That depends on how fast and determined policy reacts to reduce and substitute energy. How do we arrive at this conclusion? A short thread 2/n

We combine macro data, household micro data, & state-of-the-art theory to derive at 4 key findings
(1) Stop of Russian energy imports would lead to a GDP decline bw 0.2% and 3%. Range depends on possibilities to adjust gas usage (baseline 0.3%, very conservative estimate 3%) 3/

(2) Taking into account adjustments in energy usage, the shortfall for gas is most severe drop among the different energy sources with 30% of consumption or 8% of total German energy consumption over the next 12 months 4/n

(3) Along the income distribution, poor households will be affected more by rising gas prices but differences are small so that fiscal policy could compensate them by targeted transfers 5/n

(4) most importantly economic policy must act immediately to strategically increasing incentives to substitute and save fossil energies. Seasonality of gas demand offers a window for policy actions. 6/n

In the short-run, policy should incentivize improvements for energy efficiency and substitution towards renewable energy. Incentives arise naturally if it is clear that high energy prices are here to stay. 7/n

Looking ahead, such “forward guidance” in energy markets will also help to reduce dependency on Russian energy sources. 8/n

The entire policy brief available here
econtribute.de/RePEc/ajk/ajkp…
9/n END

English version of policy brief here
econtribute.de/RePEc/ajk/ajkp…