EUROPEAN CENTRAL BANKEUROSYSTEMWorking Paper SeriesRomanos Priftis,Raphael SchoenleFiscal and macroprudential policiesduring an energy crisisNo3032Disclaimer:This paper should not be reported as representing the views of the European Central Bank(ECB).The views expressed are those of the authors and do not necessarily reflect those of the ECB.AbstractWe construct a New-Keynesian E-DSGE model with energy disaggregation and fi-nancial intermediaries to show how energy-related fiscal and macroprudential policiesinteract in affecting the euro area macroeconomy and carbon emissions.When a shockto the price of fossil resources propagates through the energy and banking sector,itleads to a surge in inflation while lowering output and carbon emissions,absent policyinterventions.By contrast,imposing energy production subsidies reduces both CPIand core inflation and increases aggregate output,while energy consumption subsidiesonly lower CPI inflation and reduce aggregate output.Carbon subsidies instead pro-duce an intermediate effect.Given that both energy subsidies raise carbon emissionsand delay the "green transition,"accompanying them with parallel macroprudentialpolicy that taxes dirty energy assets in bank portfolios promotes "green"investmentwhile enabling energy subsidies to effectively mitigate the adverse effects of supply-typeshocks.witnessed in recent years in the EA.Keywords:DSGE model,energy sector,energy subsidies,financial frictions,macropru-dential policy.JEL classification:E52,E62,H23,Q43,Q58.ECB Working Paper Series No 3032