: We estimate that the recent surge in international fossil fuel prices will raise European households’ cost of living in 2022 by close to 7 percent of consumption on average. Household burdens vary significantly across and within countries, but in most cases they are regressive. Policymakers have mostly responded to the shock with broad-based price-suppressing measures, including subsidies, tax reductions, and price controls. Going forward, the policy emphasis should shift rapidly towards allowing price signals to operate more freely and providing income relief to the vulnerable. The surge in energy prices will encourage energy conservation and investments in renewable energy, but the manyfold rise in natural gas prices could lead to a persistent switch towards coal. To ensure steady progress towards carbon emissions reduction goals, authorities could use the opportunity to strengthen carbon pricing when global fossil fuel prices decline in the future. Non-price incentives for investments in energy efficiency and renewable energy should also be enhanced, as envisaged in the RePowerEU plan. Surging Energy

https://www.elibrary.imf.org/downloadpdf/journals/001/2022/152/001.2022.issue-152-en.xml

Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels

: This paper analyzes the implications of disruptions in Russian gas for Europe’s balances and economic output. Alternative sources could replace up to 70 percent of Russian gas, allowing Europe to avoid shortages during a temporary disruption of around 6 months. However, a longer full shut-off of Russian gas to the whole of Europe would likely interact with infrastructure bottlenecks to produce very high prices and significant shortages in some countries, with parts of Central and Eastern Europe most vulnerable. With natural gas an important input in production, the capacity of the economy would shrink. Our findings suggest that in the short term, the most vulnerable countries in Central and Eastern Europe — Hungary, Slovak Republic and Czechia — face a risk of shortages of as much as 40 percent of gas consumption and of gross domestic product shrinking by up to 6 percent. The effects on Austria, Germany and Italy would also be significant, but would depend on the exact nature of remaining bottlenecks at the time of the shutoff and consequently the ability of the market to adjust. Many other countries are unlikely to face such constraints and the impact on GDP would be moderate—possibly under 1 percent. Immediate policy priorities center on actions to mitigate impacts, including to eliminate constraints to a more integrated gas market via easing infrastructure bottlenecks, to accelerate efforts in defining and agreeing solidarity contributions, and to promote stronger pricing pass through and other measures to generate greater energy savings. National responses and RePowerEU contains many important measures to help address these challenges, but immediate coordinated action is called for, with specific opportunities in each of these areas. significant, but would depend on the policy response and exact nature of remaining bottlenecks and other frictions at the time of the shutoff and consequently the ability of the market to adjust. In contrast, many countries in the EU are unlikely to face such constraints and the impact on GDP would be moderate. Once Europe can fully overcome adjustment frictions, and demand and supply fully adjust to prices in an integrated market, output effects could be much smaller for the EU as a whole and heterogeneity in the country level impact would also be reduced.

Natural Gas in Europe: The Potential Impact of Disruptions to Supply

https://www3.ntu.edu.sg/home/qfeng/WuFengLi20140630.pdf

Does local governments’ budget deficit push up housing prices in China?

Can bank credit withstand falling house price in China

This paper studies the demand for and supply of residential housing in urban China since the late 1980s when the urban housing market became commercialized. Using aggregated annual data from 1987 to 2012 in a simultaneous equations framework we show that the rapid increase in the urban residential housing price can be well explained by the forces of demand and supply, with income determining demand and cost of construction affecting supply. We find the income elasticity of demand for urban housing to be about 1, the price elasticity of demand about -1.1, and the price elasticity of supply of the total housing stock about 0.5. The resulting long-run effect of income on urban housing price in elasticity terms is about 0.7, because the increase in income has shifted the demand curve outward more rapidly than the supply curve.

/pdf/housing-prices-in-urban-china-as-determined-by-demand-and-1r44xsgfd0.pdf

Housing Prices in Urban China as Determined by Demand and Supply

This paper uses a vector of macroeconomic and monetary policy fundamental variables to investigate the existence of speculative bubbles on national residential house market in China over the period from Mar.1998 to Feb.2013.In the past few years, except the quantitative easing policy was implemented in USA, many monetary policy instruments also have been used on the asset markets in China, such as expansionary of monetary supply and lower benchmark interest rate and lending rate. These led to the hyperinflation happened in China and property price increased dramatically after 2009. Because of the booming in the real estate industry, we are interested in whether there is a housing bubble existing in the market. Three sets of bubble attributes are examined, including unit root test and co-integration procedures, we find no evidence of rational bubbles in the national housing market. The tests for duration dependence in the negative returns on house prices suggest that China housing market is not affected by rational bubbles. Overall, this essay proposes monetary policy and macroeconomic variables are important factors for the increasing of housing prices. It is also necessary for monetarists to consider about the impact of interest rates on housing prices.

https://www.macrothink.org/journal/index.php/rae/article/viewFile/4946/4011

House Price Bubbles in China

: We analyze the potential impacts on the German economy of a complete and permanent shutoff of the remaining Russian natural gas supplies to Europe, accounting for the curtailment of flows through Nord Stream 1 that has already taken place. We find that such a scenario could lead to gas shortages of 9 percent of national consumption in the second half of 2022, 10 percent in 2023 and 4 percent in 2024, which would be worse in the winter months, and would likely fall on firms, given legal protections on households. We combine the effects of less gas on production with the consequent effects of reduced supply of intermediate goods and services to downstream firms, and with reduced economic activity due to rising uncertainty. Together, these three channels reduce German GDP relative to baseline levels by about 1.5 percent in 2022, 2.7 percent in 2023 and 0.4 percent in 2024, with no gains in subsequent years from deferred economic activity. The associated rise in wholesale gas prices could increase inflation by about 2 percentage points on average in 2022 and 2023. Our simulations suggest that the economic impacts can be reduced significantly by having households voluntarily share a small part of the burden, and by rationing gas supplies more to more gas-intensive and downstream firms. We also suggest other ways to enhance German energy security.

The Economic Impacts on Germany of a Potential Russian Gas Shutoff

/pdf/the-2020-2022-inflation-surge-across-europe-a-phillips-curve-1zw3g8af.pdf

The 2020-2022 Inflation Surge Across Europe: A Phillips-Curve-Based Dissection

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Papers

House Price Bubbles in China

The Economic Impacts on Germany of a Potential Russian Gas Shutoff

The 2020-2022 Inflation Surge Across Europe: A Phillips-Curve-Based Dissection