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The Macroeconomic Impact of Structural Reforms in Product and Labour Markets: Trade-Offs and Complementarities

Author

Listed:
  • Dimitris Papageorgiou

    () (Bank of Greece)

  • Evangelia Vourvachaki

    (Bank of Greece)

Abstract

This paper studies the impact of product and labour market structural reforms and the effects of their joint implementation with alternative debt consolidation strategies. The set-up is a DSGE model calibrated for the Greek economy. The results show that structural reforms produce important long-run GDP gains that materialize earlier, the faster the reforms are implemented. When implemented jointly with fiscal consolidations, structural reforms may amplify the short-run costs of fiscal tightening. The GDP dynamics depend on the fiscal instrument used for public debt consolidation. In the long run, however, there are complementarity gains irrespective of the fiscal instrument used.

Suggested Citation

  • Dimitris Papageorgiou & Evangelia Vourvachaki, 2015. "The Macroeconomic Impact of Structural Reforms in Product and Labour Markets: Trade-Offs and Complementarities," Working Papers 197, Bank of Greece.
  • Handle: RePEc:bog:wpaper:197
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:streco:v:44:y:2018:i:c:p:88-99 is not listed on IDEAS
    2. Yannis M. Ioannides & Christopher A. Pissarides, 2015. "Is the Greek Crisis One of Supply and Demand?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 349-373.

    More about this item

    Keywords

    Structural reforms; Debt consolidation; Small open economy; General equilibrium model;

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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