A study of Swedish data shows that such changes have contributed approximately 0.2 percentage points a year during the second half of the 1990s(3). 3 The same picture, although applying to the situation in the United States, can be seen in US studies. 4 Another possibility to improve the accounting is to look more closely at the link between labour and capital. So far the analysis has been based on the two resources in production being dealt with separately. But there are good examples of when labour and capital are interdependent. Technical knowledge becomes particularly valuable with regard to the development of programs and systems, the production of computer games, etc. Artists, film stars, elite athletes/sportsmen and others active in the experience industry get more out of their special skills through the developments in IT and communications. The US central bank governor Ben Bernanke uses the company Walmart as another example. 5 For the purpose of using the IT investments the company had made, they reorganised their work, gave the staff further training and changed the relationship to their suppliers. This type of technique for general use, of which IT can be said to be an example, can in turn push up other investment, such as further education. There are also other ways of developing the analysis.
Some people would argue that the stocks of assets held by Central Banks matter more than the flows of purchases. Others would contend that the composition and size of purchases are the real levers. The issue boils down to whether an expansion in the monetary basis is enough to trigger credit expansion or whether the latter is correlated to banks willingness to expand credit and more importantly to the appetite of economic agents to borrow. Based on how monetary policies have been conducted for the past several decades, banks have always had the ability to expand credit at a given level of interest rate irrespective of the size of the Central Bank’s balance sheet. Being at the ZLB does not change that simple reality. Hence I would tend to argue that, given the transmission channels of an asset purchase program, its composition and length may matter as much as its size. In any event, increasing the size of the Central Bank’s balance sheet, via large scale asset purchases, sends very important signals. This “signaling” operates at several levels. It may contribute to strengthening forward guidance on the policy rate. More importantly, it may have a direct impact on inflation expectations, therefore contributing to lowering real interest rates. When the balance sheet size is explicitly linked to the achievement of an inflation objective as in Japan, it may prove an effective tool to communicate the monetary authority’s determination – what economists would call a “commitment device”.