Structural Reforms and Macroeconomic Performance in the Euro Area Countries: A Model-Based Assessment
By S. Gomes, P. Jacquinot, Matthias F. Mohr, M. Pisani. Social Science Research Network, 2011
166 citations recorded by the source corpus.
We quantitatively assess the macroeconomic effects of country-specific supply-side reforms in the euro area by simulating EAGLE, a multi-country dynamic general equilibrium model. We consider reforms in the labor and services markets of Germany (or, alternatively, Portugal) and the rest of the euro area. Our main results are as follows. First, a unilateral markup reduction by 15 percentage points in the German (Portuguese) labor and services market would induce an increase in the long-run German (Portuguese) output equal to 8.8 (7.8) percent. Second, cross-country coordination of reforms would add extra benefits to each region, by limiting the deterioration of relative prices and purchasing power that a country faces when implementing reforms unilaterally. In the long run German (Portuguese) output would increase by 9.2 (8.6) percent. Third, cross-country coordination would make the macroeconomic performance of the different regions more homogeneous, in terms of price competitiveness and real activity. Overall, our results suggest that while reforms implemented individually by each country in the euro area will produce positive effects, cross-country coordination produces larger and more evenly distributed (positive) effects.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/433bf1a67e0b0824c8d1b7661e0436f17c62bef9
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Citations in the corpus
- The Effects of Labor and Product Market Reforms: The Role of Macroeconomic Conditions and Policies (2018, background): “Conventional large-scale DSGE model featuring a range of nominal and real frictions typically imply that exogenous wage and price mark-up reductions yield gradual output gains, with those being independent of macroeconomic conditions and policies, partly due to log-linearization around steady state ”
- Productivity growth in Italy: a tale of a slow-motion change (2018, unknown): “42 A similar figure is obtained by Gomes et al. (2011), who use a similar model to analyze the implementation of the same type of reform in Germany.”