Now, the growth rate is expected to be even higher than last year. In the meantime, however, growth prospects for the euro area have improved. Important structural reforms have been introduced.
Bundesbank estimates suggest that the euro is significantly undervalued, at least if long-term historical experience is taken as a criterion.36 A number of other authors have reached similar conclusions.37 Somewhat less recent studies by IMF or OECD staff also find evidence of a significant undervaluation.38 Looking for possible causes for the recent weakness of the euro, it will soon become apparent that the euro’s exchange rate reacted asymmetrically to macroeconomic events on each side of the Atlantic.