Thanks to such tools, international headwinds may hamper, but do not annul the effectiveness of major central banks in influencing economic outcomes. The structural reforms solution Before moving on to monetary policy, let me first recall that another proposed option to boost the recovery is to increase growth potential in the medium and long-term through structural reforms.
However, structural reforms entail short-term contractionary effects many times. Eggertsson, Ferrero and Raffo (2014) highlight that such contractionary short-term effects are amplified at the LB, because they cannot be off-set by expansionary monetary policy through a reduction in interest rates.