Universidad Carlos III de Madrid - UC3M
Effects of Policy Mix on European Regional Convergence
Authors: Ignacio Sacristán López-Bravo (Universidad Carlos III de Madrid), Carlos San Juan Mesonada (EconPol Europe, Universidad Carlos III de Madrid)
Viernes 28 de enero de 2022, por Carlos San Juan
This paper analyses the impact of the fiscal-monetary policy mix on the convergence on per capita income of the least developed regions (Objective 1) of the European Union (EU 28) during the implementation of the three European Structural and Investment Funds (ESIF) programmes between 2000 and 2020. The Solow-Swan growth model with control variables allows us to assess the absorption capacity of regions in the different phases of the economic cycle. The empirical results show the effectiveness of EU Regional and Cohesion Policy. However, the combination of fiscal and monetary policy shows an impact that is asymmetric, depending on the region. Thus, a policy mix of fiscal restraint and monetary expansion would boost growth in all regions, but would slow down the convergence process in Objective 1 regions.