The magnitude of consequences of the energy prices and terms of trade shock, in the euro area and in France

Abstract

The terms of trade shock, comes from the sharp energy price increases while most European countries are energy net importers. It emerged during the post-Covid recovery and was amplified by the war in Ukraine, it amounts to more than 2% of GDP in 2022 for European economies. Beyond the magnitude of this shock, we analyse the consequences of this shock in the case of France. The final distribution of the terms of trade shock depends on many factors, not only the fiscal support but also the degree and timing of pass-through to producer prices and wages. But ultimately, households and businesses have to share the burden.