Sectoral Shocks and the Role of Market Integration: The Case of Natural Gas
AEA Papers and Proceedings
vol. 113,
May 2023
(pp. 43-46)
Abstract
We quantify how market integration affects the economic propagation of sectoral supply shocks at the example of a Russian gas shutoff to the European Union. An open-economy, multisector general equilibrium model suggests that the adverse output impact on the European Union shrinks fourfold if integration with the global liquified natural gas (LNG) market is considered. On the flip side, other LNG importers also see adverse output effects. Due to nonlinearities, the combined total economic damage is less than half with integration, compared to the counterfactual case without. Governments should foster further integration to make economies more resilient to supply shocks.Citation
Albrizio, Silvia, John Bluedorn, Christoffer Koch, Andrea Pescatori, and Martin Stuermer. 2023. "Sectoral Shocks and the Role of Market Integration: The Case of Natural Gas." AEA Papers and Proceedings, 113: 43-46. DOI: 10.1257/pandp.20231045Additional Materials
JEL Classification
- F13 Trade Policy; International Trade Organizations
- F15 Economic Integration
- F51 International Conflicts; Negotiations; Sanctions
- L95 Gas Utilities; Pipelines; Water Utilities
- P28 Socialist Systems and Transitional Economies: Natural Resources; Energy; Environment
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
- Q35 Hydrocarbon Resources