EconPapers    
Economics at your fingertips  
 

Strengthening the Euro Area; The Role of National Structural Reforms in Building Resilience

John Bluedorn, Shekhar Aiyar (), Romain Duval (), Davide Furceri (), Daniel Garcia-Macia, Yi Ji, Davide Malacrino, Haonan Qu, Jesse Siminitz and Aleksandra Zdzienicka

No 2019/005, IMF Staff Discussion Notes from International Monetary Fund

Abstract: Cross-country differences in economic resilience—in an economy’s ability to withstand and adjust to shocks—remain significant in the euro area. In part, the differences reflect the lack of a national nominal exchange rate as a mechanism to adjust to shocks. The IMF staff has argued that union-wide architectural changes such as the banking union, the capital markets union, and a central fiscal capacity can help foster greater international risk sharing. Yet even these changes cannot insure against all shocks. National policies thus have a vital role to play. This IMF staff discussion note analyzes how national structural policies can help euro area countries better deal with economic shocks. Using a mix of empirical and modeling approaches, the note finds that growth-enhancing reforms to labor and product market regulations, tailored to country-specific circumstances, would help individual euro area economies weather adverse shocks. Higher-quality insolvency regimes are associated with more efficient factor reallocation following a shock. The note also finds that structural and cyclical policies interact. Greater rigidities make economies more fragile, putting a higher burden on fiscal policy. This is especially true for members of a monetary union. Countries should build fiscal space in good times and tackle rigidities, reducing their need for countercyclical policies in bad times while making countercyclical policies more effective when deployed.

Keywords: Commodity markets; Global financial crisis of 2008-2009; Structural reforms; Financial crises; Employment; SDN,monetary union,fiscal policy,area economy,exchange rate,risk premium,total factor productivity,unemployment insurance (search for similar items in EconPapers)
Pages: 31
Date: 2019-06-17
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=46234 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfsdn:2019/005

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Staff Discussion Notes from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().

 
Page updated 2021-04-19
Handle: RePEc:imf:imfsdn:2019/005