about it than other high technology areas because of the availability of a wide variety of data. moreover, economists better understand the role of it in the u. s. economy, particularly its influence on productivity growth, because developments in this sector are more easily quantified than developments in other pioneering fields, such as biotechnology. in thinking about information technology equipment and productivity, i find a useful starting point to be recalling the role of it capital accumulation during the last business cycle. work by federal reserve economists suggests that a large chunk of the increase in the rate of productivity growth in the late1990s was due to the accumulation of it capital. during that period, many firms invested heavily in it in an effort to stay on top of the so - called " technological revolution. " one consequence of this drive to acquire high - tech equipment appears to have been a massive overhang of it capital that has only recently been largely worked through. an example of this overhang has been the great amount of underutilized fiber optic cable resulting from the race to build fiber optic networks. the accumulation of it capital boosted productivity growth in many industries. at least some of the capital, however, may have been accumulated without a clear understanding of how to fully utilize the technology to create value for the adopting organizations. as a result, in recent years firms appear to be realizing further productivity gains as they discover new and better methods for using it. as i'm sure many in this audience know better than i do, one way in which firms have started to use it more effectively is by exploiting synergies among network equipment, computing equipment, and software. these synergies may spur adoption of new technologies and increase the potential for further productivity gains. for example, in the 1990s, the combination of cheap modems, faster semiconductors, and browser software helped to jumpstart the world wide web. more recently, firms have been using leading - edge it products to consolidate their networks, effectively enabling a single communications network to carry data, voice, and video. besides innovations in hardware, ongoing developments in software have helped firms augment the capabilities of their communications equipment and computer networks. increasingly, software upgrades are used to roll out new features without the need for heavy investment in new hardware. for example, a business using an internetbased telephone system, better known as voip ( voice over internet protocol ), may be able to upgrade the features on its phones through a software update rather than buying new phones or

debt. last august, the fomc announced that it would begin reinvesting principal payments on agency mbs and agency debt into longer - term treasury securities, and over the subsequent couple of months or so, the public remarks of federal reserve officials made note of the possibility of a further expansion of the portfolio. consequently, when the committee announced in early november that it intended to purchase an additional $ 600 billion in longer - term treasury securities, that decision was largely anticipated by financial market participants, and it occasioned only minimal market response. however, taken together the movements in longer - term interest rates that occurred between the august and november fomc meetings are strikingly similar to those on the prior announcement dates shown in the a burgeoning literature focuses on the experience with asset purchase programs of the federal reserve and other central banks ; for example, see d ’ amico and king ( 2010 ) ; gagnon and others ( 2010 ) ; hamilton and wu ( 2010 ) ; and joyce and others ( 2010 ). bis central bankers ’ speeches table, bolstering the judgment that these securities purchases contribute to more accommodative financial conditions. one complication that arises in evaluating the contribution of portfolio balance effects to the observed movements in longer - term rates is that news about large - scale asset purchases may also influence investors ’ perceptions regarding the likely path of short - term interest rates. such effects may not have been very important, however, when the fomc announced the expansion of its securities purchases in march 2009. as shown in figure 4, that announcement appeared to have only modest effects on the outlook of professional forecasters ( left panel ) and investors ( right panel ) regarding the likely trajectory of the federal funds rate. thus, the substantial decline in longer - term yields following this announcement appears to have mainly reflected the effect of the purchases in pushing down term premiums rather than a shift in the expected path of the funds rate. 5 this evidence suggests that the portfolio balance channel of influence is not only operative but also fairly large. that said, as we saw in figure 2, the expected path of the federal funds rate does appear to have flattened for a time during the late summer and early autumn of last year. even allowing for that change in near - term policy expectations, however, it seems reasonable to conclude that the announcement of additional securities purchases mainly affected financial conditions through the portfolio balance channel. to assess the macroeconomic effects of the fed ’ s large - scale asset purchase program,