Research

We measure the euro area (EA) output gap and potential output using a non-stationary dynamic factor model estimated on a large dataset of macroeconomic and financial variables. Our results indicate that, between 2012 and 2024, the EA economy was consistently tighter than suggested by institutional estimates, implying that its weak growth reflects a potential output problem rather than a business-cycle one. Moreover, we find that the decline in trend inflation—rather than economic slack—kept core inflation below 2% before the pandemic, while cyclical co-movements account for at least 30% of the post-pandemic rise in core inflation. Finally, relative to other model-based measures, our estimates display substantially smaller quasi-real-time revisions.

We introduce EA-MD-QD, a new publicly available dataset comprising 1136 macroeconomic time series for the euro area (EA) and its ten largest member countries observed at monthly or quarterly frequency. Since January 2024, EA-MD-QD has been updated monthly and continuously revised, providing a valuable resource for policy analysis in the EA. Using EA-MD-QD, we study country-specific impulse responses to an EA-wide monetary policy shock. Results reveal moderate yet significant cross-country heterogeneity, with differences between so-called core countries, such as France and Germany, and peripheral countries, such as Italy and Spain, in their price and interest rate responses, together with meaningful differences in real activity, while stock price responses are relatively homogeneous. Evidence points to homeownership and saving behavior as potential drivers of the observed cross-country differences.

We analyse economic growth vulnerability of the four largest Euro Area (EA) countries under stressed macroeconomic and financial conditions. Vulnerability, measured as a lower quantile of the growth distribution conditional on EA-wide and country-specific underlying factors, is found to be higher in Germany, which is more exposed to EA-wide economic conditions, and in Spain, which has large country-specific sectoral dynamics. We show that, under stress, financial factors amplify adverse macroeconomic conditions. Furthermore, even severe sectoral (financial or macro) shocks, whether common or country-specific, fail to fully explain the vulnerability observed under overall stress. Our results underscore the importance of monitoring both local and EA-wide macro-financial conditions to design effective policies for mitigating growth vulnerability.

We analyze whether textual information extracted from firms’ earnings calls can improve forecasts of the euro area job vacancy rate. Using transcripts from euro area headquartered firms, we construct a monthly indicator of labour demand based on keywords related to labour market pressures and include it into a mixed frequency Bayesian VAR alongside standard hard and soft indicators. A pseudo–real-time evaluation shows that earnings calls provide timely and valuable signals for tracking vacancy dynamics. Among soft indicators, factors limiting production deliver the largest forecasting gains, while real labour-market indicators such as unemployment add little once qualitative signals are included. Forecast improvements are largely driven by information from the manufacturing sector, whose signals prove substantially more informative than those from services, especially when paired with earnings calls. Taken together, our results highlight the usefulness of high-frequency text-based information for improving short-term labour-demand forecasts in the euro area.