Young Economists | Bridging science and practice

The presentation offers a rigorous and well-structured analysis of the macroeconomic effects of carbon price shocks and the appropriate monetary policy response. The empirical methodology is sound, using local projections with a recognized shock series, and the model is carefully estimated using Bayesian impulse response matching. The key model features—limited substitutability between green and fossil energy, adjustment costs, and household heterogeneity—are well-motivated and shown to be crucial for matching the data. The analysis of monetary policy is particularly insightful, highlighting the trade-off between inflation and output stabilization and showing that a Ramsey planner would tolerate temporarily higher inflation to mitigate the output contraction. The comparison of alternative Taylor rules provides practical guidance for policymakers. The presentation is clear and well-paced, with appropriate technical detail. The main limitations are the short sample period and the focus on transitory shocks, which may not capture long-term substitution possibilities. The speaker acknowledges these limitations. Overall, this is a high-quality contribution that bridges empirical evidence and theoretical modeling, with clear policy implications. The title accurately reflects the content, and the presentation is suitable for an academic audience.

The title accurately reflects the content: a young economist presents her research, bridging scientific analysis and practical policy implications.

8/10

The presentation is based on a rigorous empirical and model-based analysis, using established econometric techniques (local projections, Bayesian estimation) and a recognized shock series (Känzig, 2023). The speaker clearly describes the methodology, data, and limitations. The content is presented at an academic level, with appropriate caveats.

Markers derived by PSI from the transcript: the creator did not define chapters.

• 00:00Introduction and motivation: EU aims for low-carbon economy, ETS as main instrument, carbon price volatility, greenflation concerns.
• 01:00Research questions: Can macro-climate models account for empirical effects of carbon price shocks? How should monetary policy respond?
• 02:00Empirical strategy: local projections with Känzig (2023) carbon price shock series, euro area data 1999-2019.
• 03:00Empirical results: positive carbon price shock increases energy and headline inflation, smaller effect on core inflation, gradual decline in emissions, significant contraction in real activity.
• 05:00Model overview: heterogeneous households (Ricardian and hand-to-mouth), CES production with energy, energy sector with green and fossil energy, adjustment costs, carbon tax.
• 07:00Estimation: Bayesian impulse response matching, key estimated parameters: low substitutability between green and fossil energy, positive adjustment cost, positive share of hand-to-mouth households.
• 09:00Model fit: model matches data well, capturing immediate inflation surge, gradual emission decline, and significant output contraction.
• 11:00Monetary policy analysis: trade-off between inflation and output, comparison of baseline Taylor rule, core inflation Taylor rule, and Ramsey optimal policy.
• 13:00Optimal policy results: Ramsey planner cuts interest rates initially, tolerates higher inflation to mitigate output fall; core inflation Taylor rule approximates optimal policy better.
• 15:00Conclusions: carbon price shocks are inflationary and contractionary, model captures key features, optimal policy favors output stabilization.

• ECB Conference on Monetary Policy 2025 programme — Official conference programme, providing context for the presentation.
• ECB Conference on Monetary Policy 2025 playlist — YouTube playlist containing all sessions of the conference.

• ECB Conference on Monetary Policy 2025 programme — The conference programme lists the presentation and provides context for the research.