What if? The macroeconomic and distributional effects for Germany of a stop of energy imports from Russia

• Published in: Economica (London) Vol. 91; no. 364; pp. 1157 - 1200
• Main Authors: Bachmann, Rüdiger, Baqaee, David, Bayer, Christian, Kuhn, Moritz, Löschel, Andreas, Moll, Benjamin, Peichl, Andreas, Pittel, Karen, Schularick, Moritz
• Format: Journal Article
• Language: English
• Published: London Blackwell Publishing Ltd 01.10.2024
• Subjects: Effects; Energy; Import substitution; Imports; Macroeconomics; Production
• ISSN: 0013-0427; 1468-0335
• DOI: 10.1111/ecca.12546

This paper discusses the economic effects of a potential cut‐off of the German economy from Russian energy imports. We use a multi‐sector open‐economy model and a simplified approach based on an aggregate production function to estimate the effects of a shock to energy inputs. We show that the effects are likely to be substantial but manageable because of substitution of energy imports and reallocation along the production chain. In the short run, a stop of Russian energy imports would lead to an output loss relative to the baseline situation, without the energy cut‐off, in the range 0.5% to 3% of GDP. This paper is part of the Economica 100 Series. Economica, the LSE “house journal” is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. Benjamin Moll is the Sir John Hicks Professor of Economics at the LSE. David Baqaee was an Asst. Prof. of Economics at the LSE. Moritz Schularick obtained his MSc from the LSE.