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Macroeconomic effects of growth-enhancing measures in the euro area

Author

Listed:
  • Alessandro Cantelmo

    (Bank of Italy)

  • Alessandro Notarpietro

    (Bank of Italy)

  • Massimiliano Pisani

    (Bank of Italy)

Abstract

We evaluate the short- and long-term effects of different growth-enhancing policy measures implemented in the euro area by simulating a calibrated New Keynesian model featuring endogenous growth via the private sector's R&D accumulation. We find that higher public investment in infrastructures, pro-competition reforms in the product market, and subsidies to R&D have a positive effect on long-term growth and raise the natural rate of interest. In the short term, these measures can have mildly negative effects on inflation through their positive effect on aggregate supply.

Suggested Citation

  • Alessandro Cantelmo & Alessandro Notarpietro & Massimiliano Pisani, 2022. "Macroeconomic effects of growth-enhancing measures in the euro area," Temi di discussione (Economic working papers) 1384, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1384_22
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    References listed on IDEAS

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    More about this item

    Keywords

    endogenous growth; R&D spending; new keynesian model; monetary policy; euro area;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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