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The impact of ECB policy on structural reforms

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  • Rieth, Malte
  • Wittich, Jana

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.

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  • Rieth, Malte & Wittich, Jana, 2020. "The impact of ECB policy on structural reforms," European Economic Review, Elsevier, vol. 122(C).
    • Handle: RePEc:eee:eecrev:v:122:y:2020:i:c:s0014292119302223
    DOI: 10.1016/j.euroecorev.2019.103361
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    Cited by:

    1. Frederik Neugebauer, 2020. "ECB Announcements and Stock Market Volatility," WHU Working Paper Series - Economics Group 20-02, WHU - Otto Beisheim School of Management.
    2. Erna Handayani & Alni Rahmawati & Eko Haryanto & Sri Wahyuni, 2020. "Abnormal return of Indonesian banking shares in the time of COVID 19:An event study on the announcement of government regulation, POJK 11 of 2020," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(7), pages 108-114, December.
    3. Campos, Nauro F. & Eichenauer, Vera Z. & Sturm, Jan-Egbert, 2020. "Close encounters of the European kind: Economic integration, sectoral heterogeneity and structural reforms," European Economic Review, Elsevier, vol. 129(C).
    4. Jonas Rapsikevicius & Jurgita Bruneckiene & Mantas Lukauskas & Sarunas Mikalonis, 2021. "The Impact of Economic Freedom on Economic and Environmental Performance: Evidence from European Countries," Sustainability, MDPI, vol. 13(4), pages 1-20, February.

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    More about this item

    Keywords

    Macroeconomic policy; Euro area; Event study; Panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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