7 The same ten-year episode had a distinctly different face in the euro area. In the downswing that started in 2001, a decline in total factor productivity reinforced, rather than offset, the diminishing contribution of capital. 8 Rapidly decelerating productivity was one force behind the counter-cyclical rebound in unit labour costs that we observed during the early part of the new millennium.
9 These events played out for much of the short history that is summarised in the volatilities scatterplot. All in all, the technological shock was negative, protracted and quantitatively important, a primary additional drag on activity in a phase of falling demand and dim economic prospects.