Possible explanations for the low productivity growth in Europe are the lack of technological progress and an unfavourable business environment 3 . Let me take a closer look at both. Concerning technological progress, there is evidence that Europe’s relative weak productivity growth can at least partly be explained by its low research-and-development efforts.
Even though the monetary policy authority follows a systematic rule as suggested by John Taylor, real time assessment of the state of the economy may lead to substantial errors, and thus contribute to a dismal outcome for the economy. Even with accurate data, it is not certain how macroeconomic policies affect economic outcomes.