of its two components, capital and labor. it appears that capital, that is, plant and equipment, can adapt and expand more expeditiously than in the past to meet demands. hence, capital capacity is now a considerably less rigid constraint than it once was. in recent years, technology has engendered a significant compression of lead times between order and delivery for production facilities. this has enabled output to respond increasingly faster to an upsurge in demand, thereby decreasing the incidence of strains on capital capacity and shortages so evident in earlier business expansions. reflecting progressively shorter lead times for capital equipment, unfilled orders to shipment ratios for non - defense capital goods have declined by 30 percent in the last six years. not only do producers have quicker access to equipment that embodies the most recent advances, but they have been able to adjust their overall capital stock more rapidly to increases in demand. the current lack of material shortages and bottlenecks, despite the high level and recent robust expansion of demand, is striking. the effective capacity of production facilities has increased substantially in recent years in response to strong final demands and the influence of cost reductions possible with the newer technologies. increased flexibility is particularly evident in the computer, telecommunications, and related industries, a segment of our economy that seems far less subject to physical capacity constraints than many older - line establishments, and one that is assuming greater importance in our overall output. but the shortening of lags has been pervasive even in more mature industries, owing in part to the application of advanced technologies to production methods. at the extreme, if all capital goods could be produced at constant cost and on demand, the size of our nation ’ s capital stock would never pose a restraint on production. we are obviously very far from that nirvana, but it is important to note that we are also far from the situation a half - century ago when our production processes were dominated by equipment such as open hearth steel furnaces, which had very exacting limits on how much they could produce in a fixed time frame and which required huge lead times to expand their capacity. even so, today ’ s economy as a whole still can face capacity constraints from its facilities. indeed, just three years ago, bottlenecks in industrial production - - though less extensive than in years past at high levels of measured capacity utilization - - were nonetheless putting significant upward pressures on prices at earlier stages of production. more recently vendor performance has deteriorated somewhat, indicating that flexibility to meet demands

ben s bernanke : brief overview of the 4th conference of the international research forum on monetary policy ( welcoming remarks ) welcoming remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the fourth conference of the international research forum on monetary policy, washington dc, 1 december 2006. * * * vice president papademos, ladies and gentlemen, i would like to welcome you to the fourth conference of the international research forum for monetary policy. the forum is one outgrowth of the increased interaction between central banks and academic institutions that, in my opinion, benefits both groups. it is a true joint effort involving the european central bank, the federal reserve board, the bmw institute for german and european studies at georgetown university, and the centre for financial studies at goethe university in frankfurt. you have a very full agenda for the next two days. the topics represent a good mix of theoretical work as well as empirical work based on both calibration and econometric estimation. you are beginning with two papers that emphasize the importance of inflation expectations. other papers examine such topics as the application of search theory, the functioning of mortgage markets, the theoretical analysis of optimal monetary policy, and empirical research on price - setting. there is a lot of intellectual food on the table. bon appetit!