The Impact of Monetary Policy on Structural Reforms in the Euro Area

The aim of this project is to estimate the impact of monetary policy on structural reforms in the euro area. We first identify exogenous ECB policy changes through an event study that extracts the unexpected variation in euro area interest rates on policy announcement days. We estimate then the effect of monetary policy shocks on the number of reforms and investigate whether the effect is stronger for countries in the periphery and with weaker macroeconomic fundamentals. Thereby, our analysis allows testing the hypothesis that expansionary monetary policy, by increasing governments’ political and financial leeway and attenuating the short-run costs of reforms, enables the implementation of competition‐friendly supply policy.