Macroeconomic accomodation of structural reforms in the Lisbon agenda context

At the Lisbon summit in March 2000 the European governments announced to initiate an ambitious bundle of large-scale structural reforms in order to make Europe "the most dynamic, knowledge-based economy in the world by 2010". According to a far-reaching consensus in the theoretical and empirical literature, well-designed supply-side reforms are highly conducive to long-run economic growth. However, the relevant literature also claims that in the short run structural reforms may lead to a temporary deterioration of productivity, growth, and employment (sometimes called the "J-curve effect of structural reforms"). In this context, the research project considers both the necessity and the potential of aggregate macroeconomic policies to accommodate economic adjustment to supply-side reforms. The central research question is to investigate theoretically and empirically the short-run and the long-run impact of macroeconomic policies on the success of structural reform policies, and to derive appropriate recommendations for policy design.

• In cooperation with: BAK Economics, Basel and Prognos AG, Basel
• Commissioned by: Federal Ministry of Economics and Technology
• Contact person: Dr. Harald Strotmann, email