life for other equipment is about seven years. firms must invest in computers at a faster rate than that for other forms of capital just to maintain a given level of the capital stock. the rapid replacement of high - tech capital means that technological progress becomes “ embodied ” in the capital stock at a faster rate than is the case for longer - lived assets. the second feature of high - tech equipment that sets it apart from other classes of capital is the sensitivity of its demand to fluctuations in the cost of capital. economists have debated for decades about the magnitude of cost - of - capital effects on traditional capital goods. a past consensus was that the cost - of - capital effect was small and very difficult to identify empirically. a somewhat different conclusion has arisen lately when the same basic models of investment are applied to spending on computers alone. the latest research suggests that computers are quite sensitive to movements in the cost of capital. the combination of an apparently high price elasticity and a rapid decline in relative computer prices - - 20 percent per year over the past decade - - likely led to the boom in high - tech investment. a third characteristic of high - tech investment is the magnitude of “ external ” or “ spillover ” effects that it generates. high - tech equipment generates benefits not only to the owner of the machine but to other agents in the economy as well. i am thinking in particular about so - called network effects - - that is, linking computers together makes possible larger productivity gains than do computers operated as stand - alone units. although difficult to measure, such network effects certainly have stimulated the demand for high - tech equipment and have helped to speed up the dispersion of new technologies. supporting structural changes the technological changes inspired by investments in computers have enhanced the ability of businesses to reduce their operating expenses. in many industries, investments in information technologies have helped firms to cut back on the volume of inventories that they hold as a precaution against glitches in their supply chain or as a hedge against unexpected increases in aggregate demand. product development costs have probably also been reduced through the use of better computer hardware and software, and new communications technologies have increased the speed with which firms can share information - - both internally and with their customers and suppliers. this is the intersection of macroeconomics and management. many business observers now believe that these newer technologies are not only reducing the cost of transforming inputs into outputs but also decreasing “ interaction costs, ” the costs incurred in getting different people and companies to

speech unconventional fiscal and monetary policy at the zero lower bound keynote speech by isabel schnabel, member of the executive board of the ecb, at the third annual conference organised by the european fiscal board on “ high debt, low rates and tail events : rules - based fiscal frameworks under stress ” frankfurt am main, 26 february 2021 one of the greatest conundrums and policy challenges of our times is the coincidence of persistently low real long - term interest rates and low inflation. even before the coronavirus ( covid - 19 ) pandemic, inflation across many advanced economies had been falling short of central banks ’ aims for nearly a decade. in the euro area, hopes that inflation would sustainably recover to levels closer to 2 % have been repeatedly and persistently disappointed, despite highly favourable financing conditions. years of subdued price pressures have raised the spectre of low inflation becoming entrenched in people ’ s expectations. considering that financial markets believe that real interest rates will remain in negative territory for the foreseeable future, private investors appear to harbour serious doubts about the capacity of the euro area economy to chart a sustainable path towards higher nominal growth. in my remarks this morning, i will argue that the experience of the past decade requires us to think differently about the optimal policy mix in the vicinity of the effective lower bound. in particular, whether low inflation will prevail in the medium term will depend not only on monetary policy but also on the decisions made by fiscal policymakers, including on the structural side. monetary policy implications of persistent supply - side shocks before the pandemic, the global economy enjoyed a period of benevolent growth. slack was gradually disappearing, output gaps had closed and unemployment had declined to record low levels in many advanced economies ( see slide 2 ). even broader measures of slack, including, for example, the number of people working part - time involuntarily, signalled growing scarcity in labour markets ( see left chart slide 3 ). yet, inflation in advanced economies did not show any signs of acceleration. since 2012, there has not been a single year in which inflation for a group of advanced economies as a whole exceeded 2 % – the level that is widely considered to be consistent with price stability ( see right chart slide 3 ). at first sight, these developments seem to point to a weakened relationship between economic slack and inflation. ecb staff analysis for the euro area, however, suggests that while the slope of the phillips curve is