It is essential for governments to intensify the implementation of structural reforms at national level and to strengthen euro area governance, including the implementation of the banking union. They should also build on progress made in fiscal consolidation and proceed with financial sector restructuring.
For example, in some of these models, strict inflation targeting - a policy of keeping inflation at zero at all times - is the optimal policy. To make these models relevant for applied policy analysis, the natural next step is to add new frictions and more complex dynamics to the benchmark models.