Output growth in the Euro Area has been disappointing since the formation of EMU. This may be the consequence of the new monetary and exchange rate arrangements, but it is necessary to remove the effects of other factors such as the growth of labour input, skills, knowledge and risk premia. This paper undertakes a growth accounting exercises and an econometric investigation of the determinants of output in Europe and the US. It concludes that EMU has probably had a small positive effect whilst differences in the accumulation of skills and labour input growth explain much of the difference in performance across countries.
