What if? The macroeconomic and distributional effects for Germany of a stop of energy imports from Russia

This paper discusses the economic effects of a potential cut-off of the German economy from Russian energy imports. We use a multi-sector open-economy model and a simplified approach based on an aggregate production function to estimate the effects of a shock to energy inputs. We show that the effects are likely to be substantial but manageable because of substitution of energy imports and reallocation along the production chain. In the short run, a stop of Russian energy imports would lead to an output loss relative to the baseline situation, without the energy cut-off, in the range 0.5% to 3% of GDP.