In a simple New Keynesian open economy setting, we analyze how local input shortages influence policy transmission and equilibrium determinacy. Shortages increase the elasticity of the local price of the scarce factor to domestic economic activity, affecting the cyclicality of marginal costs and incomes. As a result, the slope of both the Phillips and the IS curve is altered, crucially influencing monetary and fiscal policy transmission. These changes are affected by factor ownership and propensities to consume. Theoretically, shortages can also raise the risk of self-fulfilling fluctuations if a rising price of the constrained factor boosts incomes for agents with high propensities to consume. We illustrate these channels for the 2022 German energy crisis.

@article{GORNEMANN2024104823,
  title    = {Limited (energy) supply, monetary policy, and sunspots},
  journal  = {European Economic Review},
  volume   = {168},
  pages    = {104823},
  year     = {2024},
  issn     = {0014-2921},
  doi      = {https://doi.org/10.1016/j.euroecorev.2024.104823},
  url      = {https://www.sciencedirect.com/science/article/pii/S0014292124001521},
  author   = {Nils Gornemann and Sebastian Hildebrand and Keith Kuester},
  keywords = {Supply constraints, Heterogeneous households, Monetary transmission, Transfer multiplier, Sunspots},
  abstract = {In a simple New Keynesian open economy setting, we analyze how local input shortages influence policy transmission and equilibrium determinacy. Shortages increase the elasticity of the local price of the scarce factor to domestic economic activity, affecting the cyclicality of marginal costs and incomes. As a result, the slope of both the Phillips and the IS curve is altered, crucially influencing monetary and fiscal policy transmission. These changes are affected by factor ownership and propensities to consume. Theoretically, shortages can also raise the risk of self-fulfilling fluctuations if a rising price of the constrained factor boosts incomes for agents with high propensities to consume. We illustrate these channels for the 2022 German energy crisis.}
}
               

In a highly interlinked global economy a key question is how foreign shocks transmit to the domestic economy, how domestic shocks affect the rest of the world, and how policy actions mitigate or amplify spillovers. For policy analysis in such a context global multi-country macroeconomic models that allow a structural interpretation are needed. In this paper we present a revised version of ECB-Global, the European Central Bank’s global macroeconomic model. ECB-Global 2.0 is a semi-structural, global multi-country model with rich channels of international shock propagation through trade, oil prices and global financial markets for the euro area, the US, Japan, the UK, China, oil-exporting economies, Emerging Asia, and a rest-of-the-world block. Relative to the original version of model, ECB-Global 2.0 features dominant-currency pricing, tariffs and trade diversion. We illustrate the usefulness of ECB-Global exploring scenarios motivated by recent trade tensions between China and the US.

@Report{Georgiadis2021_WP,
  author       = {Georgiadis, Georgios and Hildebrand, Sebastian and Ricci, Martino and Schumann, Ben and van Roye, Björn},
  date         = {2021-03},
  title        = {ECB-Global 2.0: a global macroeconomic model with dominant-currency pricing, tariffs and trade diversion},
  type         = {ECB Working Paper},
  number       = {2530},
  abstract     = {In a highly interlinked global economy a key question is how foreign shocks transmit to the domestic economy, how domestic shocks affect the rest of the world, and how policy actions mitigate or amplify spillovers. For policy analysis in such a context global multi-country macroeconomic models that allow a structural interpretation are needed. In this paper we present a revised version of ECB-Global, the European Central Bank’s global macroeconomic model. ECB-Global 2.0 is a semi-structural, global multi-country model with rich channels of international shock propagation through trade, oil prices and global financial markets for the euro area, the US, Japan, the UK, China, oil-exporting economies, Emerging Asia, and a rest-of-the-world block. Relative to the original version of model, ECB-Global 2.0 features dominant-currency pricing, tariffs and trade diversion. We illustrate the usefulness of ECB-Global exploring scenarios motivated by recent trade tensions between China and the US.},
  keywords     = {macro-modelling, multi-country models, spillovers},
}
              

In this report, we summarize the contributions to the 53rd Konstanz Seminar on Monetary Theory and Policy 2022.

@Article{Hildebrand2022_CCM,
  author       = {Hildebrand, Sebastian and Stiepelmann, Gero},
  date         = {2022},
  journaltitle = {Credit and Capital Markets – Kredit und Kapital},
  title        = {53rd Konstanz Seminar on Monetary Theory and Policy 2022},
  doi          = {10.3790/ccm.55.3.419},
  number       = {3},
  pages        = {419--426},
  volume       = {55},
}
               

In this report, we summarize the contributions to the 54th Konstanz Seminar on Monetary Theory and Policy 2023.

@Article{Hildebrand2023_CCM,
  author       = {Hildebrand, Sebastian and Stiepelmann, Gero},
  date         = {2023-10},
  journaltitle = {Credit and Capital Markets -- Kredit und Kapital},
  title        = {54th Konstanz Seminar on Monetary Theory and Policy 2023},
  doi          = {10.3790/ccm.2023.01.hildebrand.stiepelmann},
  number       = {2},
  pages        = {1--9},
  volume       = {56},
}