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Oil Shocks and the Excise Duty Tax in a DSGE Model Setting

Authors
  • Lenarčič, Črt
Type
Published Article
Journal
Zagreb International Review of Economics and Business
Publisher
Sciendo
Publication Date
Nov 01, 2018
Volume
21
Issue
2
Pages
49–69
Identifiers
DOI: 10.2478/zireb-2018-0014
Source
De Gruyter
Keywords
License
Green

Abstract

This paper sets up a small open economy general equilibrium model operating in a monetary union. Exogenous oil shocks that hit the modelled economy are alleviated by introducing a pro-cyclical excise duty tax rule on oil prices. It provides a model-based theoretical background for studying a fiscal response of curbing the negative effects of volatile global oil prices on inflation. Against this backdrop, we estimate the key parameters of the DSGE model and simulate different responses of the fiscal policy tax rule, based on different values of the responsiveness of the excise duty parameter.

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