mr ferguson asks whether information technology is the key to higher productivity growth in the united states and abroad remarks by mr robert w ferguson jr, member of the board of governors of the us federal reserve system, before the 2000 global economic and investment outlook conference at the carnegie bosch institute, pittsburgh on 21 september 1999. * * * the last few years have seen an explosion in the uses of information technology throughout the american economy. at the same time, trend us productivity growth appears to have risen to its highest rate since the 1970s. casual empiricism would suggest a connection – that the enormous investment in computer technology that has been going on for at least twenty years has finally started to bear fruit. but although information technology is available, at least in theory, to the whole world, the recent surge in productivity growth appears to have been stronger in the united states than elsewhere, including the other industrialized countries. this raises the interesting questions of what else besides simple availability is needed to translate the promise of information technology into real productivity gains and whether – whatever it is – the united states has more of it? these questions are impossible to answer with precision, so the purpose of my talk this afternoon is to identify particular features of the american economy that might contribute to an especially hospitable climate for translating the potential gains from information technology into actual productivity growth. i also want to be careful not to suggest that gains from the use of information technology can safely be assumed to go on indefinitely at their recent pace. the recent technical advances represent a continuation of a long string of fundamental leaps in technology that have worked their way through the economic system over many years, boosting productivity growth in the process, but how long a particular innovation has a beneficial effect on productivity growth is difficult to say. that depends on the rate of investment in the equipment that embodies the new technology, the rate at which the labor force is able to acquire needed skills, and, of course, on the fundamental potential of the technology itself. history demonstrates that the boost to productivity growth from a particular technological advance is not unlimited and eventually will be fully exploited. just as “ trees do not grow to the sky ”, so, too, increases in the rate of productivity growth from any given advance are not without limits. one should be cautious in extrapolating from past trends. what we do know what we do know is that the use of information technology, at least in the united states, has been growing by leaps and bounds. for example

the process of identifying the regulatory gaps. this is taking place within an international discussion, which the ecb strongly supports. the ultimate aim must be to extend the regulatory net to cover all instruments, institutions and markets that are either systemically important or which play a key role for the functioning of markets. hedge funds and credit rating agencies are at the centre of the debate. in europe, the discussions on proposed regulatory initiatives to establish a harmonised framework for credit rating agencies and on assessing possible initiatives for hedge funds are important. the proposed regulatory framework for the registration and oversight of rating agencies – with an important role for the committee of european securities supervisors and the committee of european banking supervisors – goes in the right direction. i also welcome the commission ’ s initiative to launch a public consultation on hedge funds, to which the eurosystem will contribute. let me stress that both initiatives, on rating agencies and hedge funds, warrant strong international coordination. the g20, of which the ecb is a member, is setting the key milestones in this context. the outcome of this debate should be an international agreement about the key features of the new regulatory paradigm. i mentioned the otc derivatives market ; this is a prime example of a systemically important market that requires more transparency and a better infrastructure. the ecb ’ s governing council has already called for a strengthening of the infrastructure for this market in view of its systemic importance. we also support the position of ecofin, which in december 2008 endorsed the idea of introducing a european ccp for otc credit default swap markets. and we see considerable merit in having this infrastructure located within the euro area. iii. the eu ’ s supervisory framework let me now come to the third and last element of my reflections this morning : the supervisory framework in europe. many issues are currently under consideration. i would like to focus on a dimension that is very relevant from a central banking perspective, namely macro - prudential supervision. macro - prudential supervision of the financial system by central banks needs to be strengthened. there is an international consensus emerging on this need, in the context of the lessons from the financial crisis. the ecb and the eurosystem have the technical capacity to assume a stronger role in macro - prudential supervision. indeed, it would be a natural extension of the mandate already assigned to us by the treaty, namely to contribute to financial stability. the tasks of macro - prudential supervision include the monitoring and analysis of financial stability,