The rise of fintech brings about new risks for regulatory arbitrage and has ramifications for financial stability. E-commerce and fintech will likely lead to a faster transmission of monetary policy. Developing adequate (re-)training opportunities and providing a labour market, regulatory, and innovation environment which encourages the creation of “good jobs” is essential to improve productivity and equity while avoiding a polarisation of labour markets. Beyond its potential to boost productivity and living standards, digitalisation: i) does not necessarily replace jobs on aggregate but changes their content ii) tends to raise income and wealth inequality iii) has ambiguous effects on competition and iv) might change how the retail and financial sectors respond to monetary policy. This paper draws on economic research to identify some of its key implications for labour markets, inequality, e-commerce and the financial system. JEL Code G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates D14 : Microeconomics→Household Behavior and Family Economics→Household Saving Personal Finance D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving J24 : Labor and Demographic Economics→Demand and Supply of Labor→Human Capital, Skills, Occupational Choice, Labor Productivity H06 : Public Economics→GeneralĪbstract Digitalisation has fundamentally changed the global economy and will continue to do so. We also find renewed support for rule-of-thumb investment strategies under the model with the nonlinear earnings process. Because households are subject to more background risk than previously considered, the estimated model implies a substantially lower coefficient of risk aversion. We show that allowing for these rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited participation of households in the stock market and their low holdings of risky assets. JEL Code E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles L2 : Industrial Organization→Firm Objectives, Organization, and BehaviorĪbstract Households face earnings risk which is non-normal and varies by age and over the income distribution. Expectations for wage growth remained strong and were broadly unchanged, with wage growth remaining the main cost concern for the surveyed companies. Consequently, non-labour input costs stabilised for most firms. The rate of growth of selling prices continued to moderate, driven especially by developments in the energy, transport and intermediate goods sectors. These developments were expected to continue in the short term, while uncertainty regarding the outlook for 2023 as a whole remained elevated. Declining activity reported in the consumer goods, retail and construction sectors was offset by growth in the consumer services and capital goods sectors in particular. According to these exchanges, which took place between 30 March and 13 April, aggregate activity growth remained subdued in the first quarter of 2023, albeit with notable differences across sectors. Abstract This box summarises the findings of recent contacts between ECB staff and representatives of 61 leading non-financial companies operating in the euro area.
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