Discussion of ‘Market Reforms in the Time of Imbalance’ (M. Cacciatore, R.Duval, G. Fiori, F. Ghironi)

Robert Kollmann () and Lukas Vogel

MPRA Paper from University Library of Munich, Germany

Abstract: To raise employment and output growth in Europe, the leading multilateral economic institutions (EU Commission, IMF, OECD) routinely recommend ‘structural reforms’ of product and labor markets that increase competition and employment flexibility. Existing model-based analyses of those reforms generally use standard New Keynesian dynamic stochastic general equilibrium (DSGE) models in which pro-competition reforms are represented as exogenous reductions in markups (see, e.g., Everaert and Schule (2008), Roeger et al. (2008), Gomes et al. (2014) and Kollmann et al. (2015)). The Cacciatore, Duval, Fiori and Ghironi paper greatly improves the toolbox for modeling structural reforms in a DSGE framework, by allowing for richer and more realistic firm dynamics and labor market frictions than conventional policy models. This enables the paper to highlight important transmission channels of reforms that are ignored by conventional models. Cacciatore, Duval, Fiori and Ghironi provide a very valuable contribution that highlights the role of firm entry and exit and of labor market frictions for the macroeconomic effects of structural reforms. Their work also suggests promising avenues for future research.

Keywords: Structural reforms; firm dynamics; labor market frictions; current account; household heterogeneity; nominal rigidities (search for similar items in EconPapers)
JEL-codes: E24 E3 F2 F3 F4 F6 J2 J3 J6 L1 L4 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge and nep-mac
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