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Can a carbon tax reduce inflation volatility? Focusing on fuel excise taxes, this paper provides systematic evidence on their role as a shock absorber that helps mitigating the impact of global oil price shocks on domestic inflation. Exploiting substantial variation in fuel tax rates across 28 OECD countries over the period from 2014 to 2021, a simple idea that a per-unit, specific tax takes up a portion of the product price immune to cost shocks goes a long way toward explaining heterogeneity in the degree of oil price pass-through into domestic inflation across countries. A back-of-the-envelope calculation from the estimation results supports its quantitative significance---differences in fuel tax rates could explain about 30% of the variation in annual headline CPI inflation rates observed between the U.S. and U.K. during the 2021 inflation surge.

Deflation --- Environmental Economics: Government Policy --- Environmental Taxes and Subsidies --- Inflation --- Price Level --- Redistributive Effects --- Taxation and Subsidies: Externalities

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As governments resort to industrial policies to achieve economic and non-economic objectives, the number of subsidies implemented each year has more than tripled in the last decade. Using detailed data across a large number of advanced and emerging economies, we empirically investigate the effects of domestic subsidies on international trade flows. Estimates from a difference-in-difference specification show that on average subsidies promote both exports and imports. These effects are partly driven by selection into subsidies, as governments target export-oriented and import-competing products. The results however mask significant differences across countries. Specifically, exports of subsidized products from G20 emerging markets increase 8 percent more than exports of other products, with no evidence of selection. The gravity estimates confirm that subsidies promote international relative to domestic trade. These spillover effects are concentrated in some industries, such as electrical machinery, and are stronger when subsidies are given through tax breaks than other policy instruments. The subsidy-led rise in trade calls for international cooperation to manage risks of retaliatory actions and possible drifts towards a subsidy war.

Balance of trade --- Commercial policy --- Currency crises --- Economic & financial crises & disasters --- Economics of specific sectors --- Economics --- Economics: General --- Empirical Studies of Trade --- Export competitiveness --- Export subsidies --- Exports and Imports --- Exports --- Externalities --- Imports --- Informal sector --- International economics --- International Trade Organizations --- International trade --- Macroeconomics --- Models of Trade with Imperfect Competition and Scale Economies --- Trade balance --- Trade Policy --- Trade policy --- Trade: General

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Selected Issues.

Climate change --- Climate --- Climatic changes --- Deflation --- Demographic Economics: General --- Demography --- Emissions trading --- Environment --- Environmental Economics --- Environmental economics --- Environmental Economics: Government Policy --- Environmental policy & protocols --- Environmental Policy --- Environmental policy --- Environmental Taxes and Subsidies --- Finance --- Global Warming --- Inflation --- International agencies --- International Agreements and Observance --- International Economics --- International institutions --- International organization --- International Organizations --- Macroeconomics --- Monetary economics --- Monetary Policy --- Monetary policy --- Money and Monetary Policy --- Natural Disasters and Their Management --- Natural Disasters --- Natural disasters --- Price Level --- Prices --- Redistributive Effects --- Taxation and Subsidies: Externalities --- Cyprus

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Internationally coordinated climate mitigation policies can effectively put the world on a path toward achieving the agreed Paris temperature goals. Such coordination could be initiated by large players, such as China, the US, India, the African Union, and the European Union. We find that the implications for fiscal revenues over time will be shaped by a combination of rising carbon prices, the gradual erosion of existing fuel tax bases, and possible revenue sharing arrangements. Public spending rises during the transition to build green public infrastructure, promote innovation, and support clean technology deployment. Countries will also need financing for compensating vulnerable households and industries, and to transfer funds to poor countries. With well-designed climate-fiscal policy relying on carbon pricing, global decarbonization will have anything from moderately positive to moderately negative impacts on fiscal balances in high-income countries. For middle and low-income countries, net fiscal impacts are generally positive and can be significant. Revenue sharing at the global level would make an historical contribution to breaching the financial divide between rich and poor countries.

Carbon tax --- Climate change --- Climate policy --- Climate --- Climatic changes --- Currency crises --- Economic & financial crises & disasters --- Economics of specific sectors --- Economics --- Economics: General --- Emissions trading --- Environment --- Environmental Conservation and Protection --- Environmental Economics --- Environmental economics --- Environmental Economics: Government Policy --- Environmental impact charges --- Environmental policy & protocols --- Environmental Policy --- Environmental policy --- Environmental Taxes and Subsidies --- Global Warming --- Greenhouse gas emissions --- Greenhouse gases --- Informal sector --- International Fiscal Issues --- International Public Goods --- Macroeconomics --- Natural Disasters and Their Management --- Public finance & taxation --- Redistributive Effects --- Taxation and Subsidies: Externalities --- Taxation --- Taxes

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This paper quantifies the macroeconomic spillover effects of conflict within sub-Saharan African (SSA) countries using a new Conflict Spillover Index (CSI), which accounts for conflict intensity and distance from conflict-affected countries. Our findings reveal an escalation in conflict spillovers across SSA since 2011, marked by considerable cross-country heterogeneity. Impulse responses show that conflict spillovers shocks significantly and persistently hinder economic growth, while concurrently elevating inflation in the “home” country. Conflict spillover shocks are also associated with increases in (current) government spending and government debt. Furthermore, the international trade transmission channel of spillovers operates mostly through increased imports, while negative effects on FDI winddown over time. Moreover, state-dependent impulse responses underscore the importance of good governance, fiscal space, and foreign aid in attenuating the adverse macroeconomic spillover effects of conflict. The detrimental impact of conflict on output is more severe in environments with weaker governance and limited fiscal space. Government expenditures tend to rise following a spillover shock in contexts of high governmental effectiveness, possibly reflecting the use of policy buffers to respond to shocks. In that context, the papers shed light on important factors to promote resilience in SSA economies.

Currency crises --- Debt Management --- Debt --- Debts, Public --- Economic & financial crises & disasters --- Economics of specific sectors --- Economics --- Economics: General --- Expenditure --- Expenditures, Public --- Exports and Imports --- Externalities --- Financial sector policy and analysis --- Fiscal Policy --- Fiscal policy --- Fiscal space --- Foreign Aid --- Foreign aid --- Informal sector --- International economics --- International finance --- International relief --- Macroeconomic Analyses of Economic Development --- Macroeconomic Aspects of International Trade and Finance: General --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Macroeconomics --- National Government Expenditures and Related Policies: General --- Public debt --- Public finance & taxation --- Public Finance --- Sovereign Debt --- Spillovers --- Total expenditures