As a reminder, the GDP growth projection in the November Inflation Report assumed economic stagnation in the euro area in 2012, but implied higher downside risks due to the assessment of a significant probability of the euro area’s slipping into recession. The new GDP growth projection assumes a recession, i.e.
The most important reasons for different policy paths are differences in underlying economic structures and differences in the timing, nature and duration of economic shocks. 3 This being said, there is an interesting sideline in Obstfeld and Rogoff’s paper, which seems to me to be very relevant for the current situation and which would be a fruitful area for future research.