Effects of Policy Mix on European Regional Convergence

Ignacio Sacristán López-Bravo and Carlos San Juan Mesonada

No 73, EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: This paper analyses the impact of the fiscal-monetary policy mix on the convergence on per capita income of the least developed regions (Objective 1) of the European Union (EU 28) during the implementation of the three European Structural and Investment Funds (ESIF) programmes between 2000 and 2020. The Solow-Swan growth model with control variables allows us to assess the absorption capacity of regions in the different phases of the economic cycle. The empirical results show the effectiveness of EU Regional and Cohesion Policy. However, the combination of fiscal and monetary policy shows an impact that is asymmetric, depending on the region. Thus, a policy mix of fiscal restraint and monetary expansion would boost growth in all regions, but would slow down the convergence process in Objective 1 regions.

Date: 2022
New Economics Papers: this item is included in nep-ban, nep-eec, nep-geo, nep-mac, nep-mon and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ces:econwp:_73

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