philip r lane : welcome address - “ challenges in the digital age ” welcome remarks by mr philip r lane, member of the executive board of the european central bank, at the ecb conference on " challenges in the digital age ", frankfurt am main, 4 july 2019. * * * it is a pleasure to welcome all of you to the ecb for this conference. 1 as a central bank, understanding the myriad implications of digitalisation for the economy is a high priority : the presentations at this conference will provide us with the latest thinking and new insights, helping us in our economic assessments. of course, digitalisation is also reshaping financial systems and payment systems, while at the same time stimulating intense interest in concepts such as crypto - assets and central bank digital currencies. however, the focus of this event is on the real economy, so i will not dwell on these other topics today. let me mention just a few economic implications of digitalisation that require careful assessment by central banks. first, substantial investment is required to reap the benefits of digitalisation. a distinctive feature of digital technologies is their reliance on intangible capital. for instance, according to national accounts data, the share of investment devoted to intellectual property has almost doubled over the past two decades. this measure, however, is bound to underestimate the actual importance of intangible capital, since many of its components are not included in the national accounts. 2 there is some evidence that the weakness of physical capital investment over the past few years, if not longer, can to a large extent be explained by intangibles. 3 at the same time, the difficulty of measuring investment in intangibles points to a more general challenge in quantifying digitalisation and its implications. furthermore, the global mobility of intangible assets means that it is also difficult to attribute the production and use of such assets to particular jurisdictions. 4 the balance of evidence suggests that europe is somewhat lagging behind its counterparts in the development of the digital sector. for example, according to oecd estimates, the share of the information and communications technology ( ict ) sector in value added is less than 5 % for most euro area countries, which compares with around 7 % for the united states and 8 % for japan. 5 similarly, when it comes to research and development ( r & d ) spending, the eu is now trailing both china and the united states, especially in the business sector. financing is one

), “ tracking the international footprints of global firms ”, bis quarterly review, march 2018. 2 / 3 bis central bankers'speeches 5 source : oecd factbook, ict value added ( % of total value added ). 6 source : oecd labour force statistics. 7 see adrjan, pawel and lydon, reamonn ( 2019 ), “ clicks and jobs : measuring labour market tightness using online data ”, central bank of ireland economic letter, vol. 2019, no 6. 8 see elding, catherine and morris, richard ( 2018 ), “ digitalisation and its impact on the economy : insights from a survey of large companies ”, economic bulletin, issue 7, ecb, november. 9 auer, raphael, levchenko, andrei and saure, philip ( 2017 ), “ international inflation spillovers through input linkages ”, nber working paper, no 23246. 10 see andrews, dan, gal, peter and witheridge, william ( 2018 ), “ a genie in a bottle? globalisation, competition and inflation ”, oecd economics department working paper, no. 1462, and ecb ( 2017 ), “ domestic and global drivers of inflation in the euro area ”, economic bulletin, issue 4, june. 11 see cavallo, alberto ( 2018 ), “ more amazon effects : online competition and pricing behaviors ”, nber working paper no 25138. 12 ibid. 13 for the euro area, see cicarelli, matteo and osbat, chiara ( 2017 ), “ low inflation in the euro area : causes and consequences ”, occasional paper series, no 181, box 3, ecb ; for canada, see charbonneau, karyne, evans, alexa, sarker, subrata and suchanek, lena ( 2017 ), “ digitalization and inflation : a review of the literature ”, bank of canada staff analytical note, 2017 – 20 ; for sweden, see sveriges riksbank ( 2015 ), “ digitisation and inflation ”, monetary policy report, february, pp. 55 – 59. 3 / 3 bis central bankers'speeches