Structural Reforms in EMU and the Role of Monetary Policy - A Survey of the Literature

44 Pages Posted: 13 Jul 2007

See all articles by Nadine Leiner-Killinger

Nadine Leiner-Killinger

European Central Bank (ECB)

Victor Lopez

European Central Bank (ECB)

Roger Stiegert

European Central Bank (ECB)

Giovanni Vitale

European Central Bank (ECB)

Date Written: July 2007

Abstract

The need for structural reforms in the euro area has often been advocated. These reforms would improve the welfare of euro area citizens and also, as a welcome side-effect, facilitate the conduct of monetary policy. Against this background, a particularly relevant question that can be posed is whether monetary policy should help implement structural reforms. The objective of this paper is to provide a review of the existing literature on structural reforms in Economic and Monetary Union (EMU) and to discuss the possible ways in which monetary policy could support the structural reform process. In the context of EMU, the main conclusions that emerge are that the monetary policy for the euro area is not the appropriate tool for mitigating the potential and uncertain short-term costs of reforms or for providing incentives for structural reforms at the national level. However, credible monetary policy aimed at price stability can improve the functioning of the supply side of the economy and contribute to an environment which is conducive to welfare-enhancing structural changes. In addition, the ECB's contribution to the implementation of structural reforms takes the form of analysis, assessment and communication.

Suggested Citation

Leiner-Killinger, Nadine and Lopez, Victor and Stiegert, Roger and Vitale, Giovanni, Structural Reforms in EMU and the Role of Monetary Policy - A Survey of the Literature (July 2007). ECB Occasional Paper No. 66, Available at SSRN: https://ssrn.com/abstract=977357

Nadine Leiner-Killinger (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Victor Lopez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
00 49 69 1344 7426 (Phone)

Roger Stiegert

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Giovanni Vitale

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6000 (Fax)

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