IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/100.html
   My bibliography  Save this paper

The Challenges of the "New Economy" for Monetary Policy

Author

Listed:
  • Cette, G.
  • Pfister, C.

Abstract

The advent and spread of information and communication technologies (ICTs) increase potential output growth . It is uncertain to what extent and for how long they do so. We use the term "new economy" (NE) to describe the acceleration in potential output growth and the attendant and partly temporary slowdown in inflation. Assessing the NE is however a complicated and delicate task. The impact of the NE on the conduct of monetary policy may differ depending on the time scale. In a long-run perspective, the central bank could capitalise on the NE to set lower inflation targets. In the short to medium term, central banks should be cautious when identifying changing patterns in potential output growth, as temporary errors in appreciation may have an asymmetrical impact on economic stability: the production instability that could result from central banks mistakenly perceiving the advent of a NE would be greater than that generated by the failure to recognise a genuine rise in potential output growth.

Suggested Citation

  • Cette, G. & Pfister, C., 2003. "The Challenges of the "New Economy" for Monetary Policy," Working papers 100, Banque de France.
  • Handle: RePEc:bfr:banfra:100
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_100_2003.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
    2. Freedman, Charles, 2000. "Monetary Policy Implementation: Past, Present and Future--Will Electronic Money Lead to the Eventual Demise of Central Banking?," International Finance, Wiley Blackwell, vol. 3(2), pages 211-227, July.
    3. Gilbert Cette & Jacques Mairesse & Yusuf Kocoglu, 2002. "Croissance économique et diffusion des TIC : le cas de la France sur longue période (1980-2000)," Revue Française d'Économie, Programme National Persée, vol. 16(3), pages 155-192.
    4. Bruce T. Grimm & Brent R. Moulton & David B. Wasshausen, 2005. "Information-Processing Equipment and Software in the National Accounts," NBER Chapters,in: Measuring Capital in the New Economy, pages 363-402 National Bureau of Economic Research, Inc.
    5. Christian Pfister & Gilbert Cette, 2002. ""Nouvelle économie" et politique monétaire," Revue Économique, Programme National Persée, vol. 53(3), pages 669-677.
    6. Stephen D. Oliner & Daniel E. Sichel, 2000. "The resurgence of growth in the late 1990s: is information technology the story?," Proceedings, Federal Reserve Bank of San Francisco.
    7. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    8. Jacquinot, P. & Mihoubi, F., 2000. "Modele a anticipations rationnelles de la conjoncture simulee : MARCOS," Working papers 78, Banque de France.
    9. Cedric Tille & Nicolas Stoffels & Olga Gorbachev, 2001. "To what extent does productivity drive the dollar?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 7(Aug).
    10. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    11. Laurence Ball & Robert R. Tchaidze, 2002. "The Fed and the New Economy," American Economic Review, American Economic Association, vol. 92(2), pages 108-114, May.
    12. Charles R. Nelson, 2000. "Output fluctuations in the United States: what has changed since the early 1980s? comments," Proceedings, Federal Reserve Bank of San Francisco.
    13. N. Gregory Mankiw, 2001. "U.S. Monetary Policy During the 1990s," NBER Working Papers 8471, National Bureau of Economic Research, Inc.
    14. Laurence Ball & Robert Moffitt, 2001. "Productivity Growth and the Phillips Curve," NBER Working Papers 8421, National Bureau of Economic Research, Inc.
    15. Friedman, Benjamin M, 2000. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking," International Finance, Wiley Blackwell, vol. 3(2), pages 261-272, July.
    16. Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April.
    17. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
    18. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
    19. Wyplosz, Charles, 2001. "Do We Know How Low Inflation Should Be?," CEPR Discussion Papers 2722, C.E.P.R. Discussion Papers.
    20. Robert J. Gordon, 2002. "Technology and Economic Performance in the American Economy," NBER Working Papers 8771, National Bureau of Economic Research, Inc.
    21. Stephen G. Cecchetti, 2006. "The New Economy and the Challenges for Macroeconomic Policy," Chapters,in: The New Economy and Beyond, chapter 4 Edward Elgar Publishing.
    22. Woodford, Michael, 2000. "Monetary Policy in a World without Money," International Finance, Wiley Blackwell, vol. 3(2), pages 229-260, July.
    23. Crafts, Nicholas, 2002. "The Solow Productivity Paradox in Historical Perspective," CEPR Discussion Papers 3142, C.E.P.R. Discussion Papers.
    24. Mervyn A. King, 1999. "Challenges for monetary policy : new and old," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-57.
    25. Nathalie Greenana & Jacques Mairesse, 2000. "Computers And Productivity In France: Some Evidence," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(3), pages 275-315.
    26. Jacques Mairesse & Gilbert Cette & Yussuf Kocoglu, 2000. "Les technologies de l'information et de la communication en France : diffusion et contribution à la croissance," Économie et Statistique, Programme National Persée, vol. 339(1), pages 117-146.
    27. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
    28. Christopher J. Gust & Jaime R. Marquez, 2000. "Productivity developments abroad," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 665-681.
    29. Cecchetti, Stephen G, 2000. "Making Monetary Policy: Objectives and Rules," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 43-59, Winter.
    30. Oliner, Stephen D. & Sichel, Daniel E., 2003. "Information technology and productivity: where are we now and where are we going?," Journal of Policy Modeling, Elsevier, vol. 25(5), pages 477-503, July.
    31. Gilbert Cette & Jacques Mairesse & Yusuf Kocoglu, 2002. "Diffusion of ICTs and Growth of the French Economy over the Long-term, 1980-2000," Post-Print hal-01297986, HAL.
    32. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    33. Charles Goodhart, 2000. "Can Central Banking Survive the IT Revolution?," FMG Special Papers sp125, Financial Markets Group.
    34. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    35. Soderstrom, Ulf, 2002. " Monetary Policy with Uncertain Parameters," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 125-145.
    36. von Kalckreuth, Ulf & Schröder, Jürgen, 2002. "Monetary Transmission in the New Economy: Service Life of Capital, Transmission Channels and the Speed of Adjustment," Discussion Paper Series 1: Economic Studies 2002,16, Deutsche Bundesbank.
    37. Benjamin M. Friedman, 2000. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking," NBER Working Papers 7955, National Bureau of Economic Research, Inc.
    38. Robert E. Litan & Alice M. Rivlin, 2001. "Projecting the Economic Impact of the Internet," American Economic Review, American Economic Association, vol. 91(2), pages 313-317, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cette, Gilbert & Mairesse, Jacques & Kocoglu, Yusuf, 2005. "Effets de la diffusion des technologies de l’information sur la croissance potentielle et observée," L'Actualité Economique, Société Canadienne de Science Economique, vol. 81(1), pages 203-230, Mars-Juin.
    2. Gilbert Cette & Christian Pfister, 2004. "Challenges of the “New Economy” for Monetary Policy," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 27-36, Spring.

    More about this item

    Keywords

    Monetary policy ; Productivity ; New economy ; Uncertainty ; Measurement issues.;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:100. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart). General contact details of provider: http://edirc.repec.org/data/bdfgvfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.