The impact of ECB policy on structural reforms.

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Authors: Malte Rieth and Jana Wittich
Date: Feb. 2020
From: European Economic Review(Vol. 122)
Publisher: Elsevier Science Publishers
Document Type: Report; Brief article
Length: 194 words

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Abstract :

Key words Macroeconomic policy; Euro area; Event study; Panel data Abstract We estimate the impact of monetary policy on structural reform adoption in the euro area. We identify exogenous ECB policy changes through an event study that extracts the unexpected variation in euro area interest rates on policy announcement days. We find that surprise monetary expansions increase the number of reforms significantly and that the effect is stronger for countries with weaker macroeconomic fundamentals or tighter public budget constraints. These findings are consistent with the hypothesis that expansionary monetary policy, by attenuating the short-run costs of reforms and increasing governments' financial leeway, spurs competition-friendly supply-side policy. Author Affiliation: (a) Department of Macroeconomics, DIW Berlin, Mohrenstraße 58, 10117 Berlin, Germany (b) Department of Macroeconomics, Humboldt-Universität zu Berlin, DIW Berlin, Mohrenstraße 58, 10117 Berlin, Germany * Corresponding author. Article History: Received 30 August 2019; Accepted 18 December 2019 (footnote) We are thankful to the Editor Florin Bilbiie, three anonymous referees, Kerstin Bernoth, Michael Burda, Marcel Fratzscher, Alexander Kriwoluzky, Henrike Michaelis, Lutz Weinke and to seminar participants at Humboldt-Universität zu Berlin and DIW for useful comments and suggestions. Byline: Malte Rieth [mrieth@diw.de] (a,*), Jana Wittich [jwittich@diw.de] (b)

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Gale Document Number: GALE|A612026195