Information and Communication Technology: Dynamics, Integration and Economic Stability

Information and Communication Technology (ICT) has become a major driver of investment and growth in OECD countries. The analysis puts the focus on key developments in the ICT sector and international outsourcing dynamics as well as the specific role of ICT in the financial sector. One can show that the expansion of ICT is not only contributing to national and international outsourcing but to insourcing as well. Furthermore, ICT affects regional integration. In the context of a modified Dornbusch model – including foreign direct investment – the impact of ICT on output and the exchange rate are discussed. The risk of overshooting in foreign exchange markets is likely to be reduced through the expansion of ICT which allows a more pro-active monetary policy.