APPENDIX 1
Supplementary Note from the Bank of England
RESPONSES TO THE TREASURY COMMITTEE'S QUESTIONS
At the Treasury Committee hearing attended by
Baroness Noakes and other non-executive Directors on 12 December
2000 it was agreed that answers would be sought from the Bank
to two questions, about new economy research and about the morale
survey. The answers follow, with apologies for the delay.
WORK ON
THE NEW
ECONOMY IN
THE BANK
The Treasury Committee asked Baroness Noakes
for information on "new economy" work under way at the
Bank of England, with a particular reference to work being undertaken
by the individual researchers attached to external members of
the MPC.
The work in this area has a number of strands.
Nick Oulton of the Monetary Analysis Division is working on a
set of measurement issues posed by Information Communications
and Technology (ICT), including the implications of the use of
alternative computer price measures. The preliminary results from
this project were referred to in a speech by Sushil Wadhwani to
the HSBC Global Investment Seminar on 12 October 2000, and will
be made available to the TC when finalised.
Other members of the Monetary Analysis Division
(Hasan Bakhshi and Jens Larsen) are analysing the implications
of advances in production techniques of the ICT goods for output
growth. In a competitive environment, such advances cause the
price of ICT goods to fall, in turn increasing investment in these
goods. The work quantifies the contribution of such investment,
associated with declines in ICT prices, to aggregate productivity
growth.
Some work has been carried out by economists
working directly for external MPC members (Jenni Greenslade and
Nick Davey, both of whom work for Sushil Wadhwani). Over the past
year, they have worked on the link between more intense competition
among goods producers and inflation. A second strand of work has
focused on the relationship between ICT investment measurement
issues and other variables used in the Bank's suite of econometric
models.
Further work is planned. Among the research
projects approved by the MPC for 2001-02 is a sectoral analysis
of productivity growth using raw data calculated specifically
for this project by Cambridge Econometrics. The idea is to examine
what can be learned from the inter-industry pattern of productivity
growth. Further work on the ICT measurement issues and ICT investment
will also take place.
The Bank also tries to keep on top of the latest
thinking on the "new economy", including seminars given
inside the Bank by academic and other organisations (such as Cambridge
Econometrics and Goldman Sachs), working party memberships (such
as OECD and ONS groups looking at productivity measurement issues),
management consultancies and industry based contacts of the Agents.
STAFF MORALE
On staff morale, the Committee asked how long
the enquiry would take and when we expected the report back. The
Bank has now received some feedback from the focus groups exercise
and is considering possible management responses, including the
need for follow-up work. There is at this stage no fixed timetable
for this work although an early priority will be to tell staff
how management intends to respond to what it has learned so far
and how it intends to take the exercise further.
20 February 2001
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