Technology and Finance Technology and Finance analyses the dramatic implications of technology for today’s financial sector, for productivity growth and for monetary policy A wide range of financial market activities are now technology driven; technology is also crucial in retail, private and corporate banking, and it has lowered entry barriers to the sector New participants are flourishing as they are strongly supported by their technology Distinguished keynote speeches in this volume were initially featured in the latest highly-respected SUERF (Société Universitaire Européenne de Recherches Financie`res) Colloquium The articles cover the following topics: ● ● ● The impact of technology on financial institutions – evolution or revolution? The relationship between technology and financial markets, including the impact of ‘electronification’ on financial markets and deposit insurance systems The real and potential impact of technology on productivity growth, and possible implications for economic growth, monetary policy and markets This volume represents the cutting edge of informed thinking on the implications of, and possible problems with, modern technology on contemporary finance Morten Balling is Professor of Finance at the Aarhus School of Business, Denmark He was president of the ASB from 1993–2001 and has been a council member of the Société Universitaire Européenne de Recherches Financie`res (SUERF) since 1994 Frank Lierman is Chief Economist at DEXIA Bank, Belgium A council member of SUERF since 2000, he is also president of the editorial board of the Revue Bancaire et Financie`re/Bank – en Financiewezen Andy Mullineux is Professor of Global Finance, and Director of the Global Finance Research Group in the Department of Accounting and Finance at the Birmingham Business School, University of Birmingham His most recent publications include co-editing Finance, Governance and Economic Performance in Pacific and South East Asia, and Economic Performance and Financial Sector Reform in Central and Eastern Europe Routledge International Studies in Money and Banking Private Banking in Europe Lynn Bicker Bank Deregulation and Monetary Order George Selgin Money in Islam A study in Islamic political economy Masudul Alam Choudhury The Future of European Financial Centres Kirsten Bindemann Payment Systems in Global Perspective Maxwell J Fry, Isaak Kilato, Sandra Roger, Krzysztof Senderowicz, David Sheppard, Francisco Solis and John Trundle What is Money? John Smithin Finance A characteristics approach Edited by David Blake Organisational Change and Retail Finance An ethnographic perspective Richard Harper, Dave Randall and Mark Rouncefield The History of the Bundesbank Lessons for the European Central Bank Jakob de Haan 10 The Euro A challenge and opportunity for financial markets Published on behalf of Société Universitaire Européenne de Recherches Financie`res (SUERF) Edited by Michael Artis, Axel Weber and Elizabeth Hennessy 11 Central Banking in Eastern Europe Nigel Healey 12 Money, Credit and Prices Stability Paul Dalziel 13 Monetary Policy, Capital Flows and Exchange Rates Essays in memory of Maxwell Fry Edited by William Allen and David Dickinson 14 Adapting to Financial Globalisation Published on behalf of Société Universitaire Européenne de Recherches Financie`res (SUERF) Edited by Morten Balling, Eduard H Hochreiter and Elizabeth Hennessy 15 Monetary Macroeconomics A new approach Alvaro Cencini 16 Monetary Stability in Europe Stefan Collignon 17 Technology and Finance Challenges for financial markets, business strategies and policy makers Published on behalf of Société Universitaire Européenne de Recherches Financie`res (SUERF) Edited by Morten Balling, Frank Lierman and Andy Mullineux Technology and Finance Challenges for financial markets, business strategies and policy makers Edited by Morten Balling, Frank Lierman and Andy Mullineux London and New York First published 2003 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2004  2003 editorial matter and selection, Morten Balling, Frank Lierman and Andy Mullineux; individual chapters, the contributors All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photcopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Technology and finance: challenges for financial markets, business strategies, and policy makers / edited by Morten Balling, Frank Lierman, and Andrew Mullineux p cm.– (Routledge international studies in money and banking ; 17) Includes bibliographical references and index ISBN 0-203-22261-X Master e-book ISBN ISBN 0-203-27707-4 (Adobe eReader Format) ISBN 0-415-29827-X (Print Edition) Banks and banking – Technological innovations–Europe Banks and banking–Technological innovations Financial institutions–Technological innovations–Europe Financial institutions–Technological innovations Financial services industry–Technological innovations I Balling, Morten II Lierman, Frank III Mullineux, A.W IV Series HG2974.T434 2002 332.1–dc21 2002026937 Contents List of figures List of tables List of contributors Acknowledgements Introduction x xii xiv xvi MORTEN BALLING PART I Survey lectures from plenary sessions Central banking in an evolving environment 11 GUY QUADEN The inter-temporal nature of risk 18 CHARLES GOODHART AND JON DANIELSSON Technology and finance: challenges for financial markets, business strategies and policy markets 41 DIDIER REYNDERS AND JEAN-PAUL SERVAIS PART II Contributions on technology and financial institutions Technology and the new economics of banking: a UK perspective 49 51 DAVID T LLEWELLYN The effects of technology on the costs and risks of Spanish banks IGNACIO FUENTES EGUSQUIZA AND TERESA SASTRE DE MIGUEL 68 viii Contents Consumer behaviour and the usage and adoption of remote and direct banking in the United Kingdom 89 BARRY HOWCROFT Employment perspectives in the German financial services industry and the impact of information technology 112 RALF-HENNING PETERS AND PETER WESTERHEIDE Technology and the (re)location of financial activity: a European perspective 131 IMAN VAN LELYVELD AND MARIEKE DONKER PART III Contributions on technology and financial markets 163 Competition and consolidation in the European exchange industry 165 OLIVIER LEFEBVRE 10 Alternative Trading Systems and liquidity 171 HANS DEGRYSE AND MARK VAN ACHTER 11 Where traders go when stock exchanges go virtual – concentration, dissemination or persistence? 190 VIVIEN LO AND MICHAEL H GROTE 12 Electronic trading and its implications for financial systems 204 HELEN ALLEN, JOHN HAWKINS AND SETSUYA SATO PART IV Contributions on technology and payments 239 13 Monetary policy in a cashless society 241 CLÁUDIA COSTA STORTI AND PAUL DE GRAUWE 14 The dynamics of payment networks 261 GOTTFRIED LEIBBRANDT 15 Electronic payments and scale properties in the banking industry KJERSTI-GRO LINDQUIST 290 Contents 16 Market structure, innovation and the development of digital money ix 302 PETER D SPENCER PART V Contributions on technology and productivity 315 17 New economy in Europe – reality or mirage? 317 ANTJE STOBBE 18 Beyond the dot.coms 335 SIEGFRIED UTZIG 19 International productivity differences: explanations and policy implications 350 JOHAN VAN GOMPEL Index 371 366 Johan Van Gompel rapidly occurs, as possibilities to imitate become exhausted In part, these aspects of behaviour offer an explanation for the perceptible decline in the growth in investment in R&D in the OECD in the 1990s (to per cent to per cent on average per year, compared to per cent on average in the 1980s), although the decline in public financing of R&D as a result of budgetary reform and the further increase in importance of the services sector, where the R&D spending is traditionally a bit lower, also played a role On the demand side of the economy too, the development of new technologies and their impact on economic growth can have a hefty impact Modern ICT applications are ‘knowledge products’ par excellence and it is obvious that a ‘learning’ society accepts such innovations more rapidly than a ‘conservative’ one A policy implication of this is that the government may not focus exclusively on promoting innovation in firms, but must also pay attention to strengthening the ICT knowledge and skills among the population Traditionally, consumers only gain knowledge after purchase of a physical product which incorporates this knowledge The government can give a helping hand here and lower the knowledge threshold by simplifying the access to new products or services, inter alia through education or by boosting the use of the Internet Indirectly, the use of new technologies by the government itself in its administration and public services (e.g PC use, Internet, etc.) can also contribute to this In turn, an increased interest on the part of citizens will prompt companies to achieve commercially worthwhile innovations more rapidly and on a larger scale Appendix 19A Measurement of total factor productivity In literature, the so-called ‘Solow analysis’ is generally used as a basis for the calculation of the total factor productivity This allows the real growth of added value in an economy (Y) to be shared between that which is attributable to labour (A), to capital (K) and to the rest, the total factor productivity (TFP): ∆Y ∆A ∆K ∆TFP = α + (1–α) + Y A K TFP where the weights α and 1–α can be calculated as the respective shares of wages and profits in gross added value.4 In the equation, only the term TFP cannot be observed Reformulation allows the growth in total factor productivity to be described as a weighted average of the growth in labour productivity (AP, i.e the production/labour ratio) and the growth in capital productivity (KP, i.e the production/capital ratio) The shares in income of the factors are used as weighting coefficients: ∆TFP ∆AP ∆KP = α + (1–α) TFP AP KP and TFP = (1/AP)α (1/KP)1–α Changes in the total factor productivity then reflect fluctuations in the profitability of the quantities of labour and capital deployed (α.AP and (1 – α).KP respectively) as a result of changes in the productivity of labour and/or capital In International productivity differences 367 view of the relatively large share of wages in added value (65 per cent to 70 per cent in the majority of industrialized countries), the total factor productivity often runs parallel to the labour productivity The difference between the two is determined by the capital intensity of the production, i.e the quantity of capital goods per unit of labour deployed (KI): ∆AP ∆TFP ∆KI = + (1–α) AP TFP KI Considered in this way, the growth in labour productivity may be the consequence of a rise in the quantity of available capital per unit of labour or of an increase in the overall efficiency of the production process by an improvement of total factor productivity Ideally, TFP should reflect the dissemination of new technologies throughout the economy In practice, that is not always the case, since TFP is calculated as a residual item and therefore also reflects distortions, for example as a result of problems of measurement Notes This was accompanied by an accommodating government policy (a hefty increase in government spending, usually low real interest rates), a stable international monetary system (Bretton-Woods system of fixed exchange rates), a professionalization of corporate policy, the expansion of multinationals and the liberalization of world trade (GATT trade rounds, establishment of the EEC) In the economic literature, documented examples relate to the cooling and control system of nuclear power stations and combating plant diseases See Cowan (1990) and Cowan and Gunby (1996) The share of computers in plant equipment (excluding buildings) in the industrialized countries was estimated for the early 1990s at five per cent at the very most See Oliner and Sichel 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122, 211, 214, 224, 226, 254; prices 20, 24, 29–31, 221, 245, 246; transformation 12, 19 autarky 268–70, 274, 279, 281 Automated Clearing House (ACH) 261, 262, 264, 270, 273 Automated Teller Machines (ATMs) 62, 94, 95, 115, 265, 275–6, 285, 287, 289, 291 automation 69–71, 114, 116, 123, 171, 174, 175, 176, 181, 186, 204, 211, 213, 220, 221, 224, 272; automated trading 172–89 bad debts 19, 20, 30 bank: account numbers 309; charges 90, 265, 290, 308; efficiency 68, 75, 76, 82; failures 13; labour productivity 77–9, 291; operating costs 75, 83, 84, 247; overcapacity 83; scale elasticities 291, 292–4, 297, 298; scale properties 6, 290–301; size 57, 189, 250, 291, 292, 294 bank costs 68, 70–2, 290–2, 338; IT costs 70–2, 74; operating costs 75, 83, 84, 247; personnel costs 3, 71–5, 298 Bank of England 11, 226, 243 bank processes 57, 63, 64, 291; lending 32, 36–8, 44, 56, 61, 93, 245, 246, 248, 249, 259; loans 2, 5, 6, 18, 20, 31, 36–8, 61, 62, 94, 245, 246, 251, 253–7, 290–2, 298–300, 309; online services 320; payment services 109, 290, 291, 294, 312; services 90, 340; trading 191, 214, 215, 245, 338 BankameriCard 304 banking and insurance industry 113–15, 122, 124, 190, 340 banking economics 51–3, 58, 61; branch network 3, 56, 58–61, 68, 71, 75, 80, 82, 83, 98, 101–3, 107, 108, 117, 121, 285; cost structures 54, 62, 63, 68–71; operations 51–3; organizational structures 51–5, 60–4 banking market 307, 338 Barclaycard 304 Basel Capital Accord 40, 84, 149 Basel Committee on Banking Supervision 16, 17, 19, 39, 88, 313 behavioural economics 91 Belgian banking system 13, 46, 47; NBB 15, 16; stock market 168, 185 Belgian presidency of EU 41, 43, 44, 47 bid–ask spreads 180, 181, 183, 186, 220–3 biotechnology 346, 353 blue chip stocks 166, 167, 184, 191, 199 bond market 15, 28, 213, 218, 221, 224, 245, 254 booms 19, 23, 28, 255, 335, 346, 352, 354, 361 Bretton-Woods system 354 brokerage 122, 124, 176, 340 brokers 63, 116, 176–9, 181–4, 187, 197, 215, 222, 228, 231, 233 budgetary control 343, 365, 366 business: assets 354; ‘Business Cycle Dates’ database 23; climate 7, 354; costs 344; cycle 2, 14, 255, 369; 372 Index models 52, 53, 66, 171, 177, 186, 311, 335, 336, 342; start-up 346, 361 capacity externalities 310 capital 19, 29, 119, 120, 170, 291, 318, 320, 324, 325, 331, 346, 348, 350, 351, 353, 358, 360–2, 364, 367; deepening 318, 320, 324–6, 328, 329, 332, 342, 357, 358, 360; goods 351, 352, 358; market 167, 168; market capitalization 174; productivity 71, 351, 353, 366 capital adequacy ratios (CAR) 31, 32, 37, 38, 255 cash 261, 263; cashless society 241–60; non-cash transactions 261, 263, 290–2, 294, 295, 298 central banks 13, 15–17, 241–3, 246–57, 310, 344; deposit rate 248, 249; government support 248, 249, 252–4, 257; lending rate 248, 249, 251, 253, 254; open market operations 252–4, 257; see also standing facilities system central order book market model 166 charge cards 304; American Express 305 cheques 261, 262, 264, 270, 273–5, 277, 290, 311 chip-cards 306, 308 clearing house 291, 304, 307, 310 closed system 286, 310 cluster analysis 3, 89, 90, 93, 97–110 collateral 44, 45, 246, 249, 250, 255, 256 Committee of Wise Men 42, 46 commodity markets 223 communication technology 11, 71, 132, 156, 190, 191, 194, 196, 303, 319, 320, 338, 339, 345, 358; costs 138; equipment; 325, 326; see also ICT; ECN companies 44, 165, 167, 228, 304, 317, 339, 341, 342, 353, 361, 364 company practices 342, 343, 348; costs 345; efficiency 354; inefficiency 352; IT companies 227, 346; ‘old’ companies 346 competition 12, 13, 42, 51–5, 59, 60, 63, 80, 82, 83, 86, 89, 108, 115–17, 165, 166, 169, 170, 172, 179, 181, 186, 191, 196, 208, 210–12, 216–18, 220, 221, 225–7, 257, 263, 290, 302–4, 306–12, 338, 339, 341–3, 345, 346, 349–52, 364, 365 complementary technologies 319, 354; see also Internet computerization 68, 69, 112, 115, 130, 165, 197, 220, 307, 317, 319, 361; computer manufacturing 336, 337, 341, 357; computer use 337, 342, 353, 354 concentration hypothesis 336 consolidation 4, 51, 57, 64, 67, 117, 165–7, 169, 170, 206, 208–10, 212–15, 228, 229, 231, 233, 234, 236, 343 consumer 29, 37, 44–6, 53, 54, 56, 58, 60, 90–6, 102–8, 205, 219, 263–6, 274, 285, 300, 304, 305, 307, 309, 310, 336, 339, 341, 342, 345, 357, 366; behavioural loyalty 95, 96, 102, 106–8; choice 91, 309, 342; confidence 3, 91–3, 95, 97, 98, 101–8, 305; convenience 342; hardware 310; interfaces 51–4, 58, 59; involvement 90, 91, 94, 95, 97, 101–8; risk 90, 91; uncertainty 90, 91, 95, 305 consumer behaviour 3, 89–91, 93–6, 98, 106, 109, 110; matrix 91–3, 97; no purchase 95, 98, 106, 108; rational–active 95, 96, 98, 102, 105–8; rational–dependent 95, 98, 102, 103, 105, 106, 108; repeat–passive 94–6, 98, 102, 104, 106 consumer protection 13, 205 consumption externality 303, 309 contagious collapse 19, 20 contestability in financial services 51, 53–6, 214, 307–9 contract banking 61–3; see also virtual bank convenience goods 303, 305 core competences 54, 60, 62, 66, 341 corporate finance 114, 135, 214, 217 cost minimization 118 cost-saving measures 114 cost–share equation 6, 295–8 credit 2, 28, 31, 38, 44, 54, 71, 75–7, 82, 86, 94, 95, 97, 98, 100, 103–16, 138, 244, 254, 302, 306, 307, 309 credit cards 5, 57, 61, 62, 261–5, 275–7, 302, 304–6, 308, 310, 312; charges 309; guarantees 305; online credit 302, 308; security 309 credit institutions 3, 13–17, 45, 66, 69–78, 84, 87, 133, 157; expansion 31; interest 309 credit rating agencies 54, 55, 75, 310 credit risk metrics 2, 28, 30, 55 critical mass 192, 193, 209, 265, 267, 273, 288, 304 cross-border payments 45, 263, 268, 276; banking 86, 116, 143, 147, 153, 156, 166, 167, 276; competition 58, 212; Index 373 consolidation 170; trading 184, 216, 225; see also straight-through processing crossing networks 176, 177, 180–6, 223, 224 Cruikshank committee 307, 308 currency 12, 134, 214, 241–3, 247, 250, 258, 259, 263, 264, 284, 288, 311 customer 3–5, 12, 54, 55, 58–63, 68, 71, 75, 80–7, 89–91, 93, 102, 103, 107, 108, 114, 137, 166, 223, 263, 271, 272, 275, 291, 295, 306, 308, 336, 340, 341; provider–customer relationship 91, 93, 96, 107, 320 customer relationship management (CRM) 320 cycles 23, 30, 31, 317, 330, 336, 350, 352, 356, 359, 361; counter cyclical 256, 257; cyclical periodicity 23; cyclical regularity 23; see also business cycle databases 19, 23, 34, 84, 85, 138, 139, 157 dealers 4, 171, 176–7, 179, 181, 183, 184, 186–9, 207, 212–14, 217–19, 221, 228, 229, 231, 232, 236, 304 debit cards 261, 263, 264, 274, 275, 277, 290, 302, 304–6, 308; charges 304; debit payment systems 310 decentralization 133, 136, 137, 302 deconstruction in financial services industry 55, 60–3 delivery technology in banking 54, 56, 58, 59, 80; alternative channels 59, 83, 84, 86, 89, 90, 94, 98, 103, 105, 107, 108, 132; economics of 55, 58 demand side 14, 114, 134, 138, 229, 366 demographic change 347, 351 depth of the market 166, 180, 182, 184, 186, 187, 210, 223 deregulation 12, 13, 46, 90, 171, 176, 191, 290, 340, 345, 365 derivatives market 2, 44, 129, 168, 193, 229 diffusion hypothesis 336 ‘digital divide’ 342 digital technology 114, 131, 196, 303, 305, 306, 309, 339, 340; hardware 305, 306; market 306; money 309, 311, 312; payment 302, 307; security 307; signatures 340 dismissal costs 352 distance marketing of financial services 44 distribution channels 2–4, 16, 30, 53, 54, 58, 75, 77, 80, 82–6, 114, 116, 140, 319, 341, 354 dividends 244, 245 dominant market position 209, 210, 227 Dutch stock market 168; central bank 256; giro 270, 271, 273 e-banking 12, 16, 81, 83, 87, 114, 306, 309; interest payments 306 e-commerce 204, 229, 234, 235, 237, 358 E-Crossnet 184, 185 e-finance 12, 13, 16, 68, 81, 160, 204, 227, 228, 233, 234, 237, 237, 243, 246, 247, 255–7 e-mail 199, 358 e-money 1, 5, 12, 13, 16, 243, 246, 247, 255, 256, 258, 302, 303, 305, 306, 309–12; government role 303; hardware 305, 306; interest 309; multifunctional 306; offline 303, 304; security 303, 305, 306; unifunctional 305 econometric analysis 113, 117, 118, 123, 338 economic activity 2, 7, 32, 34, 35, 37, 133, 243, 245, 255, 339, 344, 350, 352, 359, 360, 365, 367, 368; base effect 359; downturn 32–6, 352, 354, 359; dynamics 339, 352; efficiency 318, 320, 332, 338, 342, 351, 358; environment 1, 11, 255, 343, 345, 348, 360; growth 11, 13, 20, 21, 25, 42, 115, 205, 231, 317, 336, 338, 343, 345, 348, 349, 353, 365, 366; indicators 1, 13, 243, 255, 257; output 336; policy 7, 235, 236, 334, 343, 345, 348, 350, 360, 365, 368; sectors 196, 326, 337, 339, 346, 357, 358; transformation 5, 51, 68, 82, 254, 288, 338, 339, 341, 342, 346, 348 Economic and Monetary Union (EMU) 7, 69, 160, 256, 331, 352, 353, 355–9, 361, 362, 364, 365; EMU-led technological change 69, 74 economies of scale 53–8, 61, 62, 64–6, 71, 116, 117, 123, 134, 194, 195, 208, 264, 271, 292, 307 education 3, 98, 100, 103–8, 113, 114, 295, 342, 350, 353, 360, 363, 364, 366 efficiency 5, 11, 12, 46, 53, 56, 57, 67, 68, 75–7, 80, 82, 87, 116, 117, 119, 123, 153–6, 174, 180, 182, 183, 186, 205, 210, 227, 307, 318, 332, 338, 340, 341, 342, 345, 350, 351, 354, 374 Index 358, 363, 365, 367; analysis 116, 123, 153–6 elasticity of demand 312 electronic: banking 3, 13, 81, 83, 87, 88, 289, 313; cash 115, 241, 261, 289, 302; communication networks (ECNs) 4, 131, 134, 136, 166, 176, 177–83, 183–5, 186–9, 191, 212, 228, 237, 319; dealing 310; finance 88, 230, 234, 236, 237; markets 174, 176, 187, 188, 222, 227, 236; media 58, 83, 310; microtransactions 306; money 259, 302, 303, 310, 311, 313; networks 5, 134, 208, 227, 336, 338–40; self-service banking 114; stock market (NASDAQ) 131, 176; trading 4–6, 68, 136, 175, 176, 186, 189, 196, 198, 199, 204–7, 209–237; wallet 306; see also automated trading Electronic Funds Transfer (EFT) 302 electronic payment 5, 6, 262, 264, 288, 290–303, 306, 310–12; multifunctional 305, 306; offline 302, 303; online 303; operating costs 311; security 302, 303, 310 electronic purse 276, 302, 305, 306, 311; Geltcarte 302; Mondex 302, 303, 305; Proton 302; security 302; smart-chip 306, 308 electronics 353 emerging markets 354 employment 42, 115–17, 122–4, 126, 128, 133, 138, 140, 149, 150, 151–3, 156–8, 324, 331, 332, 345–8, 365; conditions 346, 347; expansion 344, 346, 347; flexibility 346, 347; lifelong 346, 348; part-time 346, 351; reduction 344, 352; temporary 346 employment protection legislation 361 enabling technology 319; see also Internet encryption 306 entrepreneur 7, 341, 343, 345, 346, 348, 349; entrepreneurial activity 343, 345, 348, 349 entry costs 116, 308 environmental regulations 354, 362, 363 equity 28, 40, 114, 217, 228, 236, 255; financing 114; premium puzzle 23; prices 20, 22, 23, 25, 220 equity market 165, 167, 170, 208, 211–13, 215, 217, 218, 222, 231–5, 236; home markets 165, 167, 170; costs 171 Eurex 193, 221, 224, 229 euro 11, 41, 42, 44–6, 191, 212; euro area 325, 326, 327; Euroland 325; Eurozone 347 Euroclear 168, 169 Euronext 4, 165, 167–9, 176, 186; Euronext Market Model 168; ‘Euronext Rulebook One’ 167 European Central Bank (ECB) 13, 14, 45, 53, 67, 250, 325–7, 331, 343, 345, 357–9 European Commission 311, 324, 329, 331 European economy 11, 13–15, 170, 191, 212, 317, 318, 327, 345, 346; labour inflexibility 347; resistance to reform 348; single currency 41, 68, 69, 74; socio-political tradition 347, 348 European stock exchanges 166, 186, 190, 191, 212; competition 165, 166, 169, 170, 191; consolidation 165–7, 170, 212; contracts 170; costs 166, 167, 170, 171; Euronext approach 167; issuers 169, 170; members 169, 170; national approach 167 European Union 42, 43, 311, 331; directives 311; European Securities Committee 43; integrated market 41, 42, 46, 47, 191 Eurosystem 14, 15, 248, 250, 257 execution 67, 166, 170, 172, 174, 177, 180–2, 184, 187–9, 204, 210, 217, 220–2, 228, 229, 232, 235 exit costs 307, 308 exponential distribution 32–6 externalities 4, 133–6, 171, 172, 179, 185, 191, 192, 194, 197, 200, 202, 208–10, 229, 261, 265, 274, 285, 289, 303, 306, 307, 309, 310, 313, 320, 333 see also capacity; consumption; membership; network fax 131, 265, 288 Federal Reserve 11, 243, 311, 327, 344, 356 financial authorities 226; see also monetary authorities; public authorities financial centres 133–6, 140, 190, 191, 193, 194, 196, 199, 200 financial institutions 16, 51, 250, 254; failures of 25 financial intermediaries 12, 19, 28–30, 44, 46, 131, 135, 137, 160, 166, 170, 176, 182, 196, 207, 216, 217, 223, 304 financial intermediation 67, 131, 135, 137, 159, 161, 237 financial markets 1–5, 11–17, 39, 41, 42, 46, 112, 121, 124, 133, 136, 158, 160, Index 375 172, 186, 188, 193, 195, 201, 204, 210, 211, 227, 228, 230, 231, 234, 236, 250, 254, 257, 361; activity 3, 86, 131–41, 143, 145, 146, 149, 151, 153, 155–7, 159, 161; relationships 307 financial products 16, 60, 61, 84, 86, 90, 91, 94, 96, 98, 102–7, 197, 201, 225 financial regulation 19, 28; see also regulation financial sector relocation 131–61, 194, 196, 197, 200; centrifugal forces 136–8, 156; centripetal forces 134–6, 138, 156, 194, 196, 198; historical factors 137; local market factors 140, 149, 157; political factors 137; regulation factors 137, 138, 140, 143, 149, 156; sector 341; technology’s effect 143, 190, 194 financial services 3, 4, 41–4, 47, 51–5, 57–61, 63, 65–7, 81, 83, 84, 89, 90, 92–4, 97, 106, 109, 112–15, 117–19, 121–4, 127, 129, 131, 132, 139, 142, 143, 159, 189, 200, 233, 319, 320, 339, 340; classification 93; location 1, 3, 5, 58, 59, 131–9, 141, 143, 145, 146, 149, 151, 153, 155–7, 159, 160, 190, 191, 193, 194, 196–200, 206, 344 Financial Services Action Plan 41, 42, 44 financial stability 11, 15–17, 29, 44, 83, 205, 207, 210, 225, 227, 302, 312 financial system 5, 15, 39, 44, 51, 52, 59, 66, 161, 191, 204, 205, 208, 210, 230, 231, 233, 235; diversity 66, 88; failure 84, 85; performance 220, 224; stability 210, 227; structure 55, 64, 66 first mover advantage 209, 229, 304, 335 fiscal policy see tax fixed income markets 207, 211, 213–15, 217, 224, 231, 232, 234, 237, 245 flexible labour market 333, 346, 347, 360; European inflexibility 347 foreign exchange markets 211, 213–15, 217, 222, 232, 234, 287, 354 fragmentation 137, 166, 186, 204, 206, 208, 210, 214–16, 225, 228, 229, 231, 233, 264, 266, 277 Frankfurt 190, 193, 195, 199, 200–2, 221; Eurex 193, 221, 224, 229 fraud 85 free goods 363 French stock market 168; Paris Bourse 185; CAC 40, 185 Full Fair Value Accounting (FFVA) 30 fund managers 136 futures markets 222, 232, 233, 237, 237 GARCH model 24–6, 30 GDP 21, 32, 34, 247, 262, 300, 320–2, 327, 331, 332, 342, 351, 357, 361 general purpose technology (GPT) 317–19, 332 ‘Geography Doesn’t Matter’ (GDM) hypothesis 132, 140, 143, 156; effect on complex information 197; geographical consequences of new technology 190, 191, 204, 216 Giro 261–4, 270–4, 276, 311; electronic giro 290, 311 global: cities 194, 201; economy 338; network 339; globalization 1, 2, 12, 13, 17, 44, 56, 66, 88, 135, 160, 161, 165, 187, 188, 194, 196, 201–3, 230, 234, 317, 333, 336, 338, 339, 342, 367; of banking 66, 135, 165; of markets 56, 196 government spending 352, 354, 362, 365, 367; policy 354, 361, 365, 367 growth in the economy 11, 13, 20, 21, 25, 42, 115, 205, 336, 338, 343, 345, 348, 349, 353, 365; potential 354 Hang Seng Stock Exchange 26, 27 harmonization 44; European 167, 169, 170 health service 340, 347; efficiency 340; reform 347 historical perspective in trend assessment 25 Hong Kong 26, 138, 172, 222, 232, 236 house prices 23, 36, 37, 255 households online 320, 342 identity cards 306 incentives 18, 19, 31, 345, 347 income 3, 14, 75, 76, 84, 97, 98, 103–8, 115, 142, 159, 193, 205, 207, 211, 213–15, 217, 224, 231, 232, 237, 264, 279, 284, 287, 288, 291, 301, 322, 336, 340, 342, 347, 351, 359, 366 industrial revolution 338 industrial society 346, 348, 349 industrialized countries 347, 353–6, 363, 367; infrastructure 354 inefficiency 116, 117 inflation 11, 14, 15, 17, 29, 241, 243, 245–8, 255, 317, 343, 344, 359 information 52, 53, 55, 91, 176, 196, 199, 217–19, 222, 226, 227, 319, 320, 338, 339, 359, 361; asymmetric 131, 176, 232, 307, 308, 339; complex 197; confidentiality 197; processing 68, 84, 376 Index 131; society 348; spillover 135, 137, 190, 195–200; transmission 135, 136, 197, 237, 339 information and communication technologies (ICT) 112, 113, 115–18, 120, 121, 123–6, 196, 317–27, 330–3, 336, 338, 339, 346, 348, 350, 355–9, 361, 366; expenditure 322, 327, 329, 330; national differences 320, 327; producing sector 317, 325–7, 330, 332, 356, 357; using sector 325–7, 356, 358 information technology (IT) 11, 12, 16, 53–5, 58, 66, 69–72, 77, 131, 214, 227, 241, 317, 320, 324, 336, 337, 343, 344, 346, 354; costs 167, 168, 321; equipment 326; exchange 197; software 325, 326 informational efficiency 182, 183, 186 infrastructure costs 167, 195, 196, 198, 199, 211 in-house matching 166, 170, 222, 223 innovation 114, 195, 205–8, 210, 212, 214, 225, 227, 241, 290, 305, 307–9, 311, 312, 319, 330, 336–8, 340, 345, 348–50, 353, 354, 359, 363–6 input demand asymmetric (non-neutral) 6, 290, 291, 294, 298 insider trading 43, 45 instinet 177–9, 181, 183, 187 insurance industry 113–16, 118, 120, 126, 127, 130, 138, 308, 309; insurance companies 28, 121–4, 126, 128 intelligence failure in financial crises 28 interbank market 69, 75, 214 interest 306, 308–11, 352, 366, 367 interest rates: high 83; level of 86, 295, 308, 309, 352; short-term 29, 243, 247, 248, 251–4, 256, 257 International Accounting Standards (IAS) 43, 45 internationalisation 166, 184, 257, 269, 353, 364 Internet 56, 58, 68, 72, 80, 81, 83, 86, 90, 94, 98, 102, 104, 116, 131, 132, 156, 197, 211, 214, 216, 246, 276, 302, 305, 306, 317–20, 322, 323, 327, 332, 335, 339–42, 357, 358, 366; applications 319; economic impact 319; multibank systems 214; private use 320, 342; in schools 342; security 83, 302; usage 323, 324, 345 Internet-based payment systems 302, 304, 305; Digicash 302, 303, 305; Paypal 302, 305 Internet Service Providers (ISPs) 304, 335, 357; charges 304 inter-operability 311 investment 3, 6, 7, 37, 46, 62, 69, 71–5, 84, 93–106, 118, 120–5, 199, 212, 221, 290, 294, 305, 307–10, 312, 318, 320, 321, 327, 332, 335–8, 343, 351, 353, 354, 357, 358, 360–2, 364–6 investors 4, 46, 136, 165, 166, 171–3, 176, 177, 179, 181, 183–6, 189, 194, 208, 216–18, 220, 221, 231, 235 ITG – Europe’s POSIT 184, 185 Japanese economy 21, 28, 30, 172, 190, 201, 222, 231, 233, 234, 237, 247, 257, 353–6, 362, 364 Jiway 184, 191 just-in-time production 341, 359 kernel density estimate 140, 141 labour: costs 73, 74, 114–16, 123, 127, 138, 220, 299, 344, 347; demand 112, 113, 115, 117–20, 123, 125, 134, 360; flexibility 346–8, 354, 360; market 7, 11, 112, 133, 134, 195, 200, 295, 330–3, 335, 346–8, 350, 354, 360–2; market reform 347, 361; productivity 77–9, 291, 317, 318, 320, 324–32, 350–3, 355, 357, 358, 360, 361, 363, 364, 366, 367; quality 330, 331–3 Lamfalussy, Baron 42, 45, 47 laundering money 43, 44 least-cost location theory 138 legal status of electronic transactions 114 legislation 42–4, 46, 216, 225, 226, 287, 360–2 Linux software 310 liquidity 12, 28, 86, 136, 165–7, 171–7, 180, 182–4, 186, 191, 193, 194, 196, 198, 199, 205, 206, 208–11, 213, 214–19, 221–7, 248–54, 256, 338 loan-to-value ratios 31, 36, 37 localization economies 194, 198–200; infrastructure costs 195, 199; labour pool 195 ‘lock-in’ effects 193, 209, 224, 266, 268, 270, 275, 276, 278, 282 London 39, 40, 137, 138, 175, 190, 193, 194, 200, 203, 221, 222, 229 London International Financial Futures and Options Exchange (LIFFE) 193, 221, 224 London Stock Exchange 222 Index 377 M3 14 macroeconomic: environment 11, 345, 348, 359; change 347; growth 317, 344, 353, 354, 360; policy 334, 343, 345; view 138, 220, 255–7, 317, 323, 324, 337, 338, 343 macro-monetary policy 29, 343 macroprudential monitoring 15 management: efficiency 340, 341, 353; errors 343 managerial technology 53, 54 market: access 216; confidence 3, 7, 28, 29, 85, 86, 223, 225, 345; consolidation 208–10, 212–15, 227; costs 136, 220; equilibrium 242, 304, 308, 309; fragmentation 204, 208, 210, 214–16, 222, 223, 225, 227; open markets 307, 312; power 308, 310; quality 180, 184, 186, 205–8, 216, 218, 219, 223 market forces 7, 12, 210, 226, 345, 348; architecture 204–7, 212, 214, 219, 223, 225–7, 231, 320; convergence 309; impact costs 177, 184, 187, 220, 221, 229; opportunities 339, 345; sectors 211; turnover 133 market microstructure 171, 174, 175, 185, 186, 205, 211, 225, 226, 229, 230, 231, 237; auction markets 4, 176–7, 179, 183–6, 217, 221, 224, 225, 237; dealer markets 4, 171, 176, 183–6, 188, 189, 212–14, 217–19, 221, 231; multilateral structure 304; structure 172, 173, 188, 205, 211, 214, 225–8, 230, 261, 287, 300, 303– 7, 309, 311, 346 marketing strategies 310 Mastercard 304, 306, 307 membership externality 306 mergers 57, 116, 117, 122, 193, 212, 215, 290, 305, 307 microeconomics 255, 304, 320, 323 microprudential monitoring 15, 17 Microsoft 304, 310 Milan Stock Exchange 185 misalignment 23, 29, 31, 309 mobile communications 132, 320; mobile phones 16, 306, 307, 310, 342, 357; numbers 309; pre-payment 306; prices 342 monetary analysis 14, 305 monetary authorities 16, 225, 226, 246, 255–7, 309–12 Monetary Authority of Singapore (MAS) 311 monetary policy 1, 5, 13–15, 17, 29, 208, 225–7, 241–60, 302, 327, 343–5; intervention 15, 176, 186, 197, 208, 210, 220, 225, 226, 248, 249, 252, 258, 354, 365; ‘wait and see’ 208 Monetary Policy Committees 29 monetary stability 11, 13, 17, 242, 246, 343; equilibrium 242, 253 monetary standards 311 money 1, 2, 5, 6, 12–14, 16, 43, 44, 51, 69, 75, 81, 83, 84, 107, 195, 196, 241–9, 252, 255–8, 261, 264, 265, 276, 287, 295, 300, 302–9, 311, 312, 352; acceptability of 303; convenience of 303, 305; multifunctional 305; supply 242, 243, 245, 247–9, 256, 257, 352; transmission 308, 309 monitoring and processing 52, 53 monopoly 13, 62, 193, 208, 209, 230, 241, 247, 250, 251, 259, 304, 305, 307, 312 mortgages 61, 62, 94, 245, 246, 255 multimedia bank–consumer interface 55, 58–60; intermediaries in 60 multimedia kiosks 90 multiple mechanism orders 181, 187 NASDAQ 131, 166, 171, 176–81, 183, 184, 186, 191, 212; see also electronic stock market Nash-equilibrium 266, 269, 277, 279 280, 287 network externalities 4, 172, 191, 192, 197, 200, 202, 208–10, 229, 261, 265, 274, 289, 307, 310, 320, 333 networks 3–5, 16, 42, 43, 59, 60, 68, 71, 83, 85, 98, 101, 103, 107, 108, 131–8, 172, 176, 177, 180, 183–7, 191, 193, 196, 197, 199, 204, 208–12, 215, 216, 223–9, 261, 265, 271, 273–7, 279, 281–5, 287, 302–4, 309–12, 320, 335, 339, 345, 358; closed 302; collaborative ventures 43, 46, 306, 310, 319; costs 304; network goods 265, 303, 305, 309; network market 227, 304; regulation 309; see also electronic networks New Economics of Retail Financial Services (NERFS) 53, 58, 65 New Economy 6, 7, 11, 14, 24, 40, 317, 318, 323–5, 327, 329, 330, 332, 333, 335–40, 342, 343, 345–9, 354, 356, 357; costs 348; structural transformation 342, 343, 345–8, 350, 354 378 Index new entrants 52, 55, 56, 60, 166, 215, 307–11, 341, 346 new technology 57–9, 66, 69, 75, 80, 83, 84, 87, 90, 112, 156, 171, 172, 179, 190, 191, 194, 211, 214, 218, 226–8, 241, 261, 268, 269, 290, 291, 294, 295, 298, 304, 307, 309, 336, 338, 342, 343, 348, 353, 354, 359–61, 363, 366, 367; access to 348 New York Stock Exchange (NYSE) 166, 171, 177, 181, 183, 186, 191, 212 non-accelerating inflation rate of unemployment (NAIRU) 343, 344 Nordic countries 6, 12, 13, 311, 312, 320, 322, 323, 333; Norwegian banking 290, 291, 295, 298, 299 oil crises 354, 355 open systems 310; see also Linux software option prices 28 Organisation for Economic Cooperation and Development (OECD) 327, 331, 332, 353, 363, 364, 366 outcomes 19 output 6, 7, 11, 14, 20, 23, 31, 39, 65, 115, 116, 118, 119, 129, 154, 155, 242, 243, 291–300, 317, 318, 333, 334, 336–9; in banking 115, 118, 154; growth 11, 14, 23, 112, 115, 116, 317 outsourcing 2, 16, 58, 61–4, 69, 70, 72, 80, 139, 341; see also contract banking; deconstruction overcapacity 83 PC banking 68, 90; PCs 6, 58, 132, 320, 322, 323, 327, 333, 366 paradigm technology 53, 54, 354 patents 310, 365 payment systems 261, 265, 276, 284, 290–2, 302–4, 307, 308, 310, 312; charges 308; costs 262–4, 266, 271–3, 276, 311; debit-based 310; efficiency 307; harmonization 274–6; national variations 261–4, 268, 270, 273, 274, 276, 277; payment technologies 261, 263, 265, 266, 268–70, 272; payments market 303–5, 309–12; security 310; stability 312; standardization 263, 265, 268, 269, 311; update costs 310; see also Internet-based pensions 45, 72, 73, 89, 94, 347, 348; private 348; reform 347, 348 Poisson distribution 23, 32–6 positive feedback 209, 210 post-war rebuilding 354; diminishing returns 354 pre-payment systems 310 price: discovery 170, 176, 177, 180, 183, 185, 186, 188, 217, 218, 221–4, 229; dynamics 40, 206, 210, 219, 221, 223, 330, 338; efficiency 210, 219, 307; elasticity 37, 298, 305, 312; indeterminacy problem 241–7; stability 1, 5, 13, 14, 30, 136, 222, 241, 243, 246, 252, 254, 256, 341, 350; pricing structures 307–10, 312, 344, 364 procyclical: exaggeration of risk 28; impulse 29, 32; short-term fluctuations 352 production process 2, 7, 68, 131, 320, 339, 350, 351, 353, 354, 358, 360, 367; costs 351; efficiency 365, 367; infrastructure 354, 365; prices 351 productivity 1, 2, 6, 7, 11, 20, 25, 42, 67, 71, 77–80, 87, 97, 130, 154, 317–19, 327, 328, 330–2, 336–8, 340–4, 350–7, 359, 360, 362–365, 367; fluctuations 352; growth 7, 11, 20, 67, 317–20, 324–30, 342–5, 351, 352, 355–9, 361, 363, 365; international differences 350, 351, 355, 361, 363; multifactor 329, 351; partial 333, 351; paradox 353–5, 366 profit 19, 67, 196, 199, 202, 228, 251, 253, 259, 266, 304, 309, 336, 360, 366; margins 116, 221, 278, 341, 342 prosperity 42, 342, 343, 351, 352 prudential: authorities 16, 17, 302, 312; supervision 137, 241, 303 public administration 340, 360, 366; efficiency 340; infrastructure 360, 362 public authorities 13 public policy 205, 207, 208, 210, 217, 225–7, 260, 303, 305, 312, 313; goods 134, 223, 230, 303, 309, 310, 312; super-public goods 303, 309, 310; see also monetary policy ‘put option’ 24 qualifications 123, 195, 346, 363 questionnaire survey 96, 97, 121 rates of return on assets 24, 25 recession 23, 31, 255, 353; ‘cleansing effect’ 353 recruitment costs 352 regulation 41–3, 46, 66, 134, 137, 138, 140, 165, 167–71, 190, 200, 207, Index 379 210–12, 216, 219, 223, 225, 226, 252, 255, 257, 263, 307–12, 347, 348, 350, 361, 362, 364; alternative trading systems 171; Calomiris proposals 28; need for flexibility 28; regulators 28, 30, 31, 45, 172, 205, 207, 226, 302–4, 307–10, 312; regulatory constraints 28, 29; securities regulators 43, 165–70; self-regulation 310, 312; variables 32 remote banking 90, 94, 98, 107, 108 research and development (R&D) 350, 353, 363–6; acquired R&D 353; performed R&D 353 reserve requirements 246, 253, 256 retail financial services 51–67 retail price index 36, 359 risk: assessment 19, 28, 30, 52, 53, 61; aversion 18, 136, 194; categories 81, 82; credit 86; legal 85, 86; management of 12, 16, 18–40, 44, 68, 80–7, 136, 217, 218, 227, 338, 348, 349; operational 84, 85, 220, 227; reputation 85; strategic and business 82–4; systemic 86, 227, 310; time-perspective 18–40; tolerance 18 securities 43, 68, 166, 176, 177, 183, 186, 194, 213, 216, 218, 219, 224, 226, 245, 253, 254, 310, 340; charges 304; dealers 304; prospectuses 43, 45, 168, 169 seigniorage revenue 247, 248, 253 self-employed 114, 339, 346 shares 213, 220, 244, 245, 335; nondomestic 165 shocks 194, 195, 205, 210, 223, 352, 354, 359; after-shocks 24–8, 30; prediction 24–8, 30 single currency 3, 11, 13, 41, 68, 69, 74, 276 single market 11, 140, 143, 148, 149, 156, 191, 193 single mechanism orders 181 skill levels 112, 113, 117, 118, 120–4, 134, 332, 346, 350, 360, 361, 366 smart cards 304, 306 smart order routing technology (SORT) 177, 179, 180; smart search agents 216, 224 social security systems 306, 346–8, 354; chip-cards 306; contributions 348; epurse 306; reform 347, 348 Solow paradox 353–5, 366 Spanish banking system 68–88; commercial banks 69–72, 74, 75; credit cooperatives 69–73, 75; savings banks 69–73, 75 spending pattern 351 spillover effects 320, 327, 330, 332, 336, 338, 350, 358–60, 364 stagflation 344 standard of living 336 standing facilities system 248, 250, 252, 254, 257 stock exchanges 190–2, 194, 215, 219, 225; centralization 190, 191, 215, 223; issuers 216, 224; members 216; virtualization 190, 191, 193, 194, 196, 198–200, 226 stock markets 14, 165–71; efficiency 174, 180, 194, 205, 223, 227; trading costs 171–6, 181, 182, 184, 186, 195, 205, 206, 221, 223, see also Belgian; Dutch; European; French; New York straight-through processing (STP) 166, 220 structural-economic characteristics 360 subcontracting 55, 61, 62, 66, 84 subscriptions 310, 320 subsidies 304, 308, 309, 360, 365; crosssubsidies 308 supermarkets 54, 58, 60 supervision: see regulation supply-side 343 switching providers 304, 305; costs 6, 263, 305, 307–309, 312 systemic stability 29 tax: policy 137, 343, 345, 360, 361; rates 343, 354, 365; returns 340 technological innovation 21, 135, 319, 320; imitation 354; spillover 135; standards 310 technology, communication and entertainment (TCE) 308–11 telecommunications 84, 135, 194, 196–8, 209, 216, 226, 227, 304, 309, 345, 353, 357, 365; charges 304, 345 telegraph 302 telephone systems 90, 94, 98, 101,103, 104, 114, 207, 214, 215, 221, 306, 308, 310 television 306; satellite broadcasting 306 telex 131, 302 time lag in New Economy 343, 345 time zones 137 380 Index Toronto Stock Exchange 176 total factor productivity (TFP) 317–20, 324, 325, 328–32, 336–8, 341, 342, 353, 358, 359, 362, 366, 367; national differences 329, 330 trade barriers 360, 364 trade unions 347 Tradepoint 184, 187, 191 traders 190, 191, 196, 199, 200, 205, 211; agglomeration of 190, 191, 194, 196, 198, 199, 200; dispersal of 193, 198; short-/long-term strategy 199 trading outcomes 205, 226; costs 206, 210, 220, 221, 223; information 207; online 342 training 307, 350, 352, 354, 360, 361, 363, 364; retraining 307 transactions 246, 261, 269, 272, 291, 298, 302, 304, 305, 307, 312; charges 308; costs 172, 219, 222, 272, 275, 276, 305, 308, 309, 338, 339, 359, 361; international 274–6; macrotransactions 302; microtransactions 302 transparency 204, 206, 207, 208, 210, 214, 217–19, 221–6, 341, 342 trends: continuous recalculation 31 turnover 133, 174 unemployment 14, 112, 317, 331, 343, 344, 346, 360, 365; benefits 347, 365 urbanization economies 194–6, 199, 200 USA economy 317–20, 326, 327, 330, 336, 343, 345–8, 350, 355–7, 359, 361, 362, 365 USA labour market 347, 360 value added 115, 118, 133, 215, 217, 221, 330, 350, 367; gross value added (GVA) 138–45, 146–9, 153, 154, 156, 157 variation round the mean 23, 24 VaR market measure 27, 28, 30 venture capital 361 Virt X 184–7 virtual bank 63, 64 virtual stock exchange 190, 193, 196, 198–200, 215, 226 virtual marketplace 319 Visa 304, 306, 307; Visacash e-purse 305, 306 volatility 24, 25, 27, 30, 86, 174, 185, 222, 227, 354, 359, 361 wages 115, 272, 295, 344, 347, 351, 352, 354, 361, 367; collective bargaining 347; differentiation 123; elasticities 120, 126; flexibility 347; structures 347 Weber’s ‘ideal types’ 92 women at work 354 working week 325, 351; conditions 346, 347, 351, 354; flexibility 347; overtime 351; shortening 325, 347, 351, 356 ... on technology and financial institutions, Parts III and IV contain respectively contributions on technology and financial markets and on technology and payments Part V deals with technology and. . .Technology and Finance Technology and Finance analyses the dramatic implications of technology for today’s financial sector, for productivity growth and for monetary policy... GOODHART AND JON DANIELSSON Technology and finance: challenges for financial markets, business strategies and policy markets 41 DIDIER REYNDERS AND JEAN-PAUL SERVAIS PART II Contributions on technology