ECB Conference on Digitalization, 2019 - Romain Duval
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Duval, Romain
Romain Duval of the IMF speaks on his topic of discussion at the ECB's Conference of Digitalization, which took place on the 6th and 7th of July, 2019.
 Well, you know, I emphasize that the rise of the digital economy has very profound macroeconomic implications, implications for macroeconomic policies, for product market regulation, monetary policy, fiscal policy. And let me give you just two examples. One is product market regulation, because the digitalization of the economy, in fact, is underpinning good things, a rise in productivity that may be forthcoming, but also less good things, which is a rise in market power. This rise in market power up to a point can be a good thing also, because you need incentives, you need markups, market power to innovate, but beyond a point, it can discourage innovation by the leaders and also by the followers that would want to overtake the leaders. And what we see now in the data is that, in fact, this rise in market power that we've seen in advanced economies, it has already had a negative impact on investment, it has reduced labor income shares to a modest extent, but still a slight negative overall. So that's something to be addressed, and for that, you're going to need adjustment to competition policies, anti-trust, and also perhaps adjustment to intellectual property rights, in particular, rewarding major innovation much more than incremental one. And the other part, the other example that I want to give is monetary policy. Here on monetary policy, one very neat example is the fact that digitalization means a rise in intangible assets, and in tangible assets, you cannot bring them as collateral to borrow. So that means in crisis times, you're going to cut on that, you're going to cut on innovation and enhancing investment that's going to reduce productivity, and that's when you need monetary policy much more than you did in the past. And monetary policy is going to be very powerful in a world with assets than in tangible.
 Well, you know, I emphasize that the rise of the digital economy has very profound macroeconomic  implications, implications for macroeconomic policies, for product market regulation,  monetary policy, fiscal policy.  And let me give you just two examples.  One is product market regulation, because the digitalization of the economy, in fact,  is underpinning good things, a rise in productivity that may be forthcoming, but also less good  things, which is a rise in market power.  This rise in market power up to a point can be a good thing also, because you need incentives,  you need markups, market power to innovate, but beyond a point, it can discourage innovation  by the leaders and also by the followers that would want to overtake the leaders.  And what we see now in the data is that, in fact, this rise in market power that we've  seen in advanced economies, it has already had a negative impact on investment, it has  reduced labor income shares to a modest extent, but still a slight negative overall.  So that's something to be addressed, and for that, you're going to need adjustment to  competition policies, anti-trust, and also perhaps adjustment to intellectual property  rights, in particular, rewarding major innovation much more than incremental one.  And the other part, the other example that I want to give is monetary policy.  Here on monetary policy, one very neat example is the fact that digitalization means a rise  in intangible assets, and in tangible assets, you cannot bring them as collateral to borrow.  So that means in crisis times, you're going to cut on that, you're going to cut on innovation  and enhancing investment that's going to reduce productivity, and that's when you need monetary  policy much more than you did in the past.  And monetary policy is going to be very powerful in a world with assets than in tangible.
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