Perspectives on Productivity and Business Cycles in Europe

Analyzes the prospects of the euro and the Lisbon agenda to increase European competitiveness. The cyclical co-movement across countries, as well as the underlying determinants, suggest that the economic costs of the euro are likely to be sustainable. Lagging European productivity growth relative to the U.S. is shown to be of structural, not cyclical, nature and partly related to the less extensive and efficient use of ICT in Europe. Greater regulatory flexibility, especially of labour markets are likely to stimulate productivity growth as well as cylical co-movement.