Structural reforms at the zero bound

Abstract:
This paper uses the European Commission’s QUEST macroeconomic model to analyse the impact of structural reforms on economic activity in an environment in which the zero bound on monetary policy rates is temporarily binding.

The simulations suggest that although such reforms can have a negative impact on economic activity in the short run, these effects tend to be small and short-lived when a variety of transmission channels are considered. The results also do not support the idea that postponing structural reforms improves economic conditions, in such and environment.

European Commission: DG Economic and Financial Affairs:European Economy: Economic Papers No.537, November 2014:Structural reforms at the zero bound http://ec.europa.eu/economy_finance/publications/economic_paper/2014/ecp537_en.htm

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