Monetary policy should be partly accommodative of inflation during energy shocks to contain unemployment, a Bank of Italy study says.

In the working paper, Nicolò Gnocato argues that energy price shocks have a greater impact on people who are unemployed than on those who are in work. This is because energy costs take up a greater share of unemployed people’s expenditure. 

Higher energy costs also mean firms cut staff, says Gnocato, and higher unemployment causes people to rein in spending. This