Yet surprisingly, and despite the negative supply-side shocks that had been hitting the euro area economy over the years up to 2007, the data suggested that both inflation volatility and output volatility in the euro area were lower than elsewhere. Has the crisis changed this picture?
BIS central bankers’ speeches  1  Obviously, output volatility in the euro area is much higher when the crisis is included in the sample. But, remarkably, the euro area still scores well on both dimensions compared with other advanced countries. So what is behind this apparent puzzle? How can nominal rigidities plus supply-side pressures not produce bad or worse macroeconomic outcomes?