, www. voxeu. org. bouis, r and r duval ( 2011 ), “ raising the potential growth after the crisis : a quantitative assessment of the potential gains from various structural reforms in the oecd area and beyond ”, oecd economics department working paper no. 835. bis central bankers ’ speeches raising growth potential is necessary for its own sake – to bring down structural unemployment and increase welfare. but is also helps monetary policy by supporting demand today, and by making it less likely that we run up against zero interest rates again in the future. the incoming data suggest that the ecb ’ s measures are now gaining traction. the recovery is firming, and inflation expectations seem to be moving towards values more consistent with our aim. but it is only through actions by other stakeholders – governments, social partners and firms – that this cyclical improvement can be made permanent. bis central bankers ’ speeches

already described. moreover, if it is true that weak demand has reduced potential growth through hysteresis effects in the labour market, it could also be true that an acceleration in demand will support potential through the same mechanism working ecb bank lending survey, april 2015. “ competitiveness and external imbalances within the euro area ”, gvar handbook structure and applications of a macro model of the global economy for policy analysis, 2013. bis central bankers ’ speeches symmetrically – for example, as the labour market tightens firms may start hiring discouraged workers and retraining them. over the longer - term, however, monetary policy cannot increase growth. the growth rate of the economy is ultimately driven by factors such as the efficiency with which resources are allocated, the strength of incentives to innovate and invest, the ease of doing business, and the quality of public institutions – in other words, by the supply - side. and making improvements in all of these areas comes down chiefly to structural policies. importantly, our monetary policy is creating a unique window of opportunity to enact such reforms. when demand is weak structural reforms can result in higher short - term adjustment costs, as for example people losing their jobs take longer to find new ones. financial frictions can also reduce the short - term confidence effects of reforms, as people cannot rely on consumption smoothing through credit to manage labour market risks. these effects can make introducing reforms harder. with our expansionary monetary policy, however, we are supporting strengthening demand and better access to credit, and thus limiting the potential downsides of reforms in the short run. for this reason, there is every reason for national authorities to push ahead with structural reforms today. there are many channels through which structural reforms can raise potential. for example, in some countries active labour market policies aimed at retraining vulnerable groups such as the low skilled, the long - term unemployed and the inactive can play a key role in getting people back to work – which is particularly important given the drag that ageing societies will create on labour supply. another example is product market reforms that enhance competition in protected sectors, which can drive productivity gains by encouraging new innovative firms to enter the market and existing ones to improve their internal efficiency – a finding recently confirmed by the imf. 8 making use of all these channels is necessary to lift growth potential. what is particularly important for the euro area today, however, is that we focus our efforts on reforms with the greatest short - term impact on demand