Can Structural Reforms Help Europe

By Gauti B. Eggertsson, A. Ferrero, Andrea Raffo. 2013

312 citations recorded by the source corpus.

Structural reforms that increase competition in product and labor markets are often indicated as the main policy option available for peripheral Europe to regain competitiveness and boost output. We show that, in a crisis that pushes the nominal interest rate to its lower bound, these reforms do not support economic activity in the short run, and may well be contractionary. In the absence of the appropriate monetary stimulus, reforms fuel expectations of prolonged deflation, increase the real interest rate, and depress aggregate demand. Our findings carry important implications for the current debate on the timing and the design of structural reforms in Europe.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/ced6c4e32f5f96e0ebc486027475aa941a0e6efa

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In Economics and Econometrics

1. Davide Furceri
2. R. Duval

Citations in the corpus

• The Effects of Labor and Product Market Reforms: The Role of Macroeconomic Conditions and Policies (2018, background): “Exogenous wage and price mark-up reductions may then have weaker short-term effects than in normal times (Eggertsson et al., 2014).”