wholesale and retail trade sector, have been the main reasons for the gap, followed by finance and business services ( excluding real estate ). in the wholesale and retail trade sector, for instance, hourly labour productivity grew on average by 1. 4 % in the euro area, while it grew on average by 4. 6 % on the other side of the atlantic. what lies behind these labour productivity developments? specific policies aimed at increasing employment, particularly in the unskilled segment of the labour market, have certainly contributed to the slowdown in labour productivity growth, especially in services, which are usually more labour - intensive. however, developments in labour supply are only part of the story. to a large extent, the slowdown in labour productivity growth can be attributed to a marked slowdown in total factor productivity ( tfp ) growth, which is generally taken as a measure of technological progress and improvements in the organisation and overall efficiency of production. between 1980 and 1995, tfp for the whole economy grew on average by 1. 5 %, before declining to 0. 8 % between 1995 and 2007. 5 and private sector services significantly contributed to this decline. indeed, tfp growth in these services slowed down from 0. 6 % between 1980 and 1995 to - 0. 1 % between 1995 and 2005. 6 several authors, such as oliner and sichel ( 2002 ), have already highlighted the major role of innovation and information and communications technology ( ict ) in the revival of labour productivity growth in the us. 7 moreover, it has been argued that the effect of ict dissemination, as measured by ict investment, has been particularly important in explaining the differences in labour productivity growth developments in some market ict - using services sectors between the euro area and the us. since the early 1980s, investment in ict in the united states has been double that of the euro area. 8 basu and others ( 2003 ) find, for instance, that industries with faster growth in ict capital in the 1980s and early 1990s had faster tfp growth rates in the late 1990s. 9 it seems that the ict investments in some private sector services in the us have sparked further innovations in managerial processes, procedures and organisational structures, and facilitated complementary innovations. the full benefits of the productivity acceleration however can only be reaped if there are no obstacles to organisational change. 10 in this regard, the structural characteristics of the euro area economies – as reflected by labour market rigidities and the lack of competition in product markets – did not

prices and bolstering growth across the globe. now the cycle is again turning. the ongoing deleveraging of the european banking system is reducing global liquidity, with cross - border credit being pulled from many emerging markets and some u. s. - dollar asset classes. market - making activity is becoming thinner, and private financing is slowing across the world. the volatility of global liquidity in recent years underscores the value of the structural and cyclical policies that can dampen these cycles and channel the flows to their most productive uses. this speech draws heavily on the forthcoming report, “ global liquidity – concept, measurement and policy implications, ” prepared by a group of the committee on the global financial system chaired by jean - pierre landau of the bank of france. bis central bankers ’ speeches defining global liquidity global liquidity is an amorphous concept. the usual suspect for any event or dynamic too complicated to explain, global liquidity is the keyser soze of international finance. it has no agreed definition and, as a consequence, there has been no coherent policy approach to tame its more violent tendencies. at its core, liquidity represents the ease with which financial institutions, households and businesses can obtain financing. 2 global liquidity cannot be understood by simply summing domestic measures of financial conditions. the international components of liquidity ( such as cross - border lending ) will affect market and macroeconomic outcomes in recipient countries, and can have a disproportionately large role in fluctuations in financial stability. to capture all the dimensions of global liquidity requires a combination of price and quantity measures. price indicators, such as the general level of interest rates or credit spreads, provide information about the conditions under which liquidity is provided, while quantity measures, such as credit aggregates, show the degree to which such conditions translate into the build - up of risks. official liquidity overall levels of global liquidity are the product of the levels of official and private liquidity and the complex interactions between the two. official liquidity is funding that is unconditionally available to settle claims through monetary authorities. it can only be created by central banks. core official liquidity is base money, or the sum of currency in circulation and funds held by financial institutions at the central bank. official liquidity has traditionally been small relative to economic activity. before the financial crisis, it was about 5 per cent of gdp in the united kingdom and the united states. in recent years,