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What is the appropriate role of structural reforms in E(M)U deepening?

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  • Kurt Bayer
  • Andreas Breitenfellner

    () (Oesterreichische Nationalbank)

Abstract

Can flexibility-enhancing “structural” reforms at the national level substitute institutional reforms at the EU level, or are they rather complementary? In this article, we first look at more broadly defined structural reforms of both institutions and product and factor markets through the lens of economic theory – and also review empirical evidence. In particular, we discuss if and how reforms depend on macroeconomic conditions and policies. We then analyze the role that reforms play for the proper functioning of Economic and Monetary Union (EMU) and for fostering the well-being of EU citizens. In a nutshell, there is no one-size policy framework that fits all. The optimal set of structural policies for an economy depends on the quality of its institutions as well as its factor endowment, level of development and/or geographical location. We argue for extending the structural reform paradigm beyond “defensive” (flexibility-enhancing) toward “upgrading” (productivity-enhancing) instruments. Design, packaging, timing and sequencing will make or break such reforms. In general, reform ownership based on broad consensus is essential at the national level. EU involvement, however, would only be justified in the case of cross-border spillovers.

Suggested Citation

  • Kurt Bayer & Andreas Breitenfellner, 2018. "What is the appropriate role of structural reforms in E(M)U deepening?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3-18, pages 102-112.
  • Handle: RePEc:onb:oenbfi:y:2018:i:q3-18:b:9
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    References listed on IDEAS

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    1. Alfred Kleinknecht & Flore N. van Schaik & Haibo Zhou, 2014. "Is flexible labour good for innovation? Evidence from firm-level data," Cambridge Journal of Economics, Oxford University Press, vol. 38(5), pages 1207-1219.
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    3. Vogel, Lukas, 2017. "Structural reforms at the zero bound," European Journal of Political Economy, Elsevier, vol. 48(C), pages 74-90.
    4. Marco Buti & Werner Rüger & Alessandro Turrini, 2009. "Is Lisbon Far from Maastricht? Trade-offs and Complementarities between Fiscal Discipline and Structural Reforms," CESifo Economic Studies, CESifo, vol. 55(1), pages 165-196, March.
    5. Eggertsson, Gauti & Ferrero, Andrea & Raffo, Andrea, 2014. "Can structural reforms help Europe?," Journal of Monetary Economics, Elsevier, vol. 61(C), pages 2-22.
    6. Matteo Cacciatore & Romain Duval & Giuseppe Fiori & Fabio Ghironi, 2017. "Market Reforms at the Zero Lower Bound," NBER Working Papers 23960, National Bureau of Economic Research, Inc.
    7. Lukas Vogel, 2014. "Structural reforms at the zero lower bound," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 13(3), pages 21-26, October.
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    9. van Riet, Ad, 2006. "Monetary Policy and Structural Reforms in the Euro Area," MPRA Paper 78585, University Library of Munich, Germany.
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    Cited by:

    1. Loewald, Christopher & Wörgötter, Andreas, 2019. "Do monetary unions dream of structural reforms?," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2019, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    2. Kurt Bayer, 2018. "Which Structural Reforms Does E(M)U Need to Function Properly?," wiiw Policy Notes 28, The Vienna Institute for International Economic Studies, wiiw.

    More about this item

    Keywords

    structural reform; economic growth; institutional reform; Economic and Monetary;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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