First, by increasing certainty over the future price level it can support investment and efficient resource allocation. Second, by reducing fluctuations in the business cycle it can help forestall hysteresis effects. Third, if one takes a “leaning against the wind” view of monetary policy, it can play a role in tempering the financial cycle and misallocation of resources that often comes with it.
But monetary policy is already playing its part in the euro area, so I do not want to dwell on this topic today. I will focus instead on an area where there is more still to do to create the conditions for sustainable long-run growth – that is, structural reforms in the euro area.