Analyzing Structural Reforms Using a Behavioral Macroeconomic Model
Paul De Grauwe and
No 6518, CESifo Working Paper Series from CESifo Group Munich
We use a behavioral macroeconomic model to analyze how structural reforms affect the economy in the short and in the long run. We consider two types of structural reforms. The first one increases the flexibility of wages and prices; the second one raises potential output in the economy. We find that structural reforms that increase the flexibility of wages and prices can have profound effects on the dynamics of the business cycle. In addition, a structural reform program that raises potential output has a stronger long-term effect on output and tends to reduce the price level more in a flexible than in a rigid economy. Finally, we analyze how structural reforms change the tradeoffs between output and inflation variability. Our main finding here is that there is an optimal level of flexibility (produced by structural reforms).
Keywords: animal spirits; structural reforms; monetary policy (search for similar items in EconPapers)
JEL-codes: E00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6518
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().