an article by Andrew Aitken (National Institute of Economic and Social Research; Economic Statistics Centre of Excellence (ESCoE)) published in National Institute Economic Review Volume 249 Issue 1 (August 2019)
Abstract
Gross Domestic Product (GDP) is often treated as shorthand for national economic well-being, even though it was never intended to be; it is a measure of (some) of the marketable output of the economy.
This paper reviews several developments in measuring welfare beyond GDP that were recently presented at the Economic Statistics Centre of Excellence (ESCoE) annual conference in May 2019.
The papers discussed fall into three broad areas.
First, a significant amount of work has focused on incorporating information about the distribution of income, consumption and wealth in the national accounts.
Second, the effects of digitisation and the growth of the internet highlight the potential value in measuring time use as a measure of welfare.
Third, the digital revolution has spawned many new, often ‘free’ goods, the welfare consequences of which are difficult to measure. Other areas, such as government services, are also difficult to measure.
Measuring economic welfare properly matters because it affects the decisions made by government and society. GDP does a reasonable job of measuring the marketable output of the economy (which remains important for some policies), but it should be downgraded; more attention should be given to measures that reflect both objective and subjective measures of well-being, and measures that better reflect the heterogeneity of peoples' experiences.
JEL classification: I31, D31, E01
Full text (PDF 14pp)
Showing posts with label GDP. Show all posts
Showing posts with label GDP. Show all posts
Friday, 23 August 2019
Tuesday, 13 August 2019
What does progress look like if we stop pursuing economic growth?
via Transforming Society from Policy Press
In their ground-breaking book, The Economics of Arrival, Katherine Trebeck and Jeremy Williams argue that, although everyday economics tells us there is no such thing as enough growth, we have, in fact, ‘arrived’. Economic growth has already brought unrivalled prosperity for GDP-rich countries; we have enough.
The challenge is now to make ourselves at home with this prosperity, to ensure we all enjoy the fruits of growth before they rot, through debt, inequality, climate change and fractured politics.
If growth is an inadequate goal, what should we be pursuing instead? There are many forms of progress, for both countries that have arrived and countries who are not there yet.
It’s important to underline the fact that growth still matters in our thinking. Growth makes arrival possible, but context is everything. Wherever people don’t have enough for a good standard of living, growth can be vital – as long as it’s shared and put to good use. But once diminishing marginal returns set in, it’s not clear what more growth is for; its work is done.
We use a variety of metaphors for this in the book. We talk about the economy being grown up, like a mature tree reaching its full and rightful size. We talk about building a house, and how growth is like the bricks and concrete that provides the structure of the house, but not the warmth and welcome of the home. In the same way, we rely on growth at the earlier stages of development to provide the resources, income, infrastructure and materials to provide a good life for everyone. Growth gives us the foundations on which to build a lasting home – but you don’t live in the foundations.
What comes afterwards is going to be a more qualitative form of progress, and the book explores a number of different avenues for progress after growth.
Continue reading
In their ground-breaking book, The Economics of Arrival, Katherine Trebeck and Jeremy Williams argue that, although everyday economics tells us there is no such thing as enough growth, we have, in fact, ‘arrived’. Economic growth has already brought unrivalled prosperity for GDP-rich countries; we have enough.
The challenge is now to make ourselves at home with this prosperity, to ensure we all enjoy the fruits of growth before they rot, through debt, inequality, climate change and fractured politics.
If growth is an inadequate goal, what should we be pursuing instead? There are many forms of progress, for both countries that have arrived and countries who are not there yet.
It’s important to underline the fact that growth still matters in our thinking. Growth makes arrival possible, but context is everything. Wherever people don’t have enough for a good standard of living, growth can be vital – as long as it’s shared and put to good use. But once diminishing marginal returns set in, it’s not clear what more growth is for; its work is done.
We use a variety of metaphors for this in the book. We talk about the economy being grown up, like a mature tree reaching its full and rightful size. We talk about building a house, and how growth is like the bricks and concrete that provides the structure of the house, but not the warmth and welcome of the home. In the same way, we rely on growth at the earlier stages of development to provide the resources, income, infrastructure and materials to provide a good life for everyone. Growth gives us the foundations on which to build a lasting home – but you don’t live in the foundations.
What comes afterwards is going to be a more qualitative form of progress, and the book explores a number of different avenues for progress after growth.
Continue reading
Thursday, 20 June 2019
Human development in the age of globalisation
a column by Leandro de la Escosura for VOX: CEPR’s Policy Portal
The concept of human development views wellbeing as being affected by a wide range of factors including health and education.
This column examines worldwide long-term wellbeing from 1870-2015 with an augmented historical human development index (AHHDI) that combines new measures of achievements in health, education, material living standards, and political freedom. It shows that world human development has steadily improved over time, although advances have been unevenly distributed across world regions.
Continue reading
And if, like me, you enjoy reading social history you will really like this piece.
The concept of human development views wellbeing as being affected by a wide range of factors including health and education.
This column examines worldwide long-term wellbeing from 1870-2015 with an augmented historical human development index (AHHDI) that combines new measures of achievements in health, education, material living standards, and political freedom. It shows that world human development has steadily improved over time, although advances have been unevenly distributed across world regions.
Continue reading
And if, like me, you enjoy reading social history you will really like this piece.
Wednesday, 20 February 2019
Wellbeing measurements, Easterlin’s paradox and new growth models: A perspective through gross national happiness
a column by Sriram Balasubramanian for VOX: CEPR’s Policy Portal
There has been considerable criticism of the general reliance on GDP as an indicator of growth and development. One strand of criticism focuses on the inability of GDP to capture the subjective well-being or happiness of a populace.
This column examines new growth models, paying particular attention to Bhutan, which has pursued gross national happiness, rather than GDP, since the 1970s. It finds evidence of the Easterlin paradox in Bhutan, and draws out lessons for macroeconomic growth models.
Continue reading
There has been considerable criticism of the general reliance on GDP as an indicator of growth and development. One strand of criticism focuses on the inability of GDP to capture the subjective well-being or happiness of a populace.
This column examines new growth models, paying particular attention to Bhutan, which has pursued gross national happiness, rather than GDP, since the 1970s. It finds evidence of the Easterlin paradox in Bhutan, and draws out lessons for macroeconomic growth models.
Continue reading
Monday, 7 January 2019
The gains from economic integration: The EU has still a long way to go
a column by David Comerford and Sevi Rodriguez Mora for VOX: CEPR’s Policy Portal
Populists in Europe are contesting the perceived benefits of economic integration between countries.
This column uses data on trade frictions to estimate the long-run impact of trade frictions on GDP if countries in Europe were to be more or less integrated. Negative between-country impacts, such as from Brexit or an EU collapse, imply a GDP reduction of between 1-3%. The potential trade benefits of a 'United States of Europe', on the other hand, may be an order of magnitude greater for its members.
Continue reading
Populists in Europe are contesting the perceived benefits of economic integration between countries.
This column uses data on trade frictions to estimate the long-run impact of trade frictions on GDP if countries in Europe were to be more or less integrated. Negative between-country impacts, such as from Brexit or an EU collapse, imply a GDP reduction of between 1-3%. The potential trade benefits of a 'United States of Europe', on the other hand, may be an order of magnitude greater for its members.
Continue reading
Saturday, 24 March 2018
A new way to measure growth and development
a column by Richard Samans for VOX: CEPR’s Policy Portal
Recent political developments in many countries suggest that most of their citizens lack confidence in the assumption of the standard growth model that everyone in a society benefits from GDP growth. This column proposes a multidimensional 'Inclusive Development Index', based on a dashboard of indicators in growth and development, inclusion, and intergenerational equity and sustainability. GDP per capita growth is weakly correlated with performance in many of the new index’s indicators, including those pertaining to employment, income and wealth inequality, and carbon intensity.
Continue reading
Recent political developments in many countries suggest that most of their citizens lack confidence in the assumption of the standard growth model that everyone in a society benefits from GDP growth. This column proposes a multidimensional 'Inclusive Development Index', based on a dashboard of indicators in growth and development, inclusion, and intergenerational equity and sustainability. GDP per capita growth is weakly correlated with performance in many of the new index’s indicators, including those pertaining to employment, income and wealth inequality, and carbon intensity.
Continue reading
Thursday, 22 February 2018
Increasingly fit again: The euro area economy is shedding the crisis legacies
a column by Marco Buti, Björn Döhring and José Leandro for VOX: CEPR’s Policy Portal
The outlook for the euro area economy depends to a large extent on whether the impact of the crisis will turn out to be permanent or transitory. This column attempts to chart out the path ahead, starting from what different narratives of the 'atypical recovery' imply about the further trajectory of GDP and inflation. In view of remaining slack, and barring an exogenous shock or policy mistakes, there is scope for solid GDP growth above potential for some time. The factors that should eventually drive an increase in core inflation are gaining force, but only gradually. The current supportive policy mix is thus appropriate for the euro area as a whole, but reforms that raise productivity and increase the economy's resilience to shocks should be accelerated.
Continue reading
The outlook for the euro area economy depends to a large extent on whether the impact of the crisis will turn out to be permanent or transitory. This column attempts to chart out the path ahead, starting from what different narratives of the 'atypical recovery' imply about the further trajectory of GDP and inflation. In view of remaining slack, and barring an exogenous shock or policy mistakes, there is scope for solid GDP growth above potential for some time. The factors that should eventually drive an increase in core inflation are gaining force, but only gradually. The current supportive policy mix is thus appropriate for the euro area as a whole, but reforms that raise productivity and increase the economy's resilience to shocks should be accelerated.
Continue reading
Friday, 16 February 2018
Microeconomic shocks drive aggregate fluctuations in Europe
a column by Christian Ebeke and Kodjovi Eklou for VOX: CEPR’s Policy Portal
The economics profession has generally explained large movements in macroeconomic aggregates such as GDP or employment by shocks to other aggregates. This is in part due to the difficulty of translating micro or localised shocks into macro-relevant ‘news’. This column argues that idiosyncratic shocks at the biggest European firms are behind 40% percent of aggregate GDP fluctuations in Europe. These results have implications for the effectiveness of traditional demand-side policies in the fine-tuning of granular economies.
Continue reading
The economics profession has generally explained large movements in macroeconomic aggregates such as GDP or employment by shocks to other aggregates. This is in part due to the difficulty of translating micro or localised shocks into macro-relevant ‘news’. This column argues that idiosyncratic shocks at the biggest European firms are behind 40% percent of aggregate GDP fluctuations in Europe. These results have implications for the effectiveness of traditional demand-side policies in the fine-tuning of granular economies.
Continue reading
Sunday, 16 July 2017
Want to know how society's doing? Forget GDP – try these alternatives
an article by Mark Rice-Oxley published in the Guardian on 27 January
Crude financial instruments dominate the headlines, but it’s metrics like grain price and inequality ratio that really reflect the world we live in
‘Carbon dioxide in the atmosphere goes up every year. If this carries on for another couple of decades, people won’t be inspecting their portfolios – they’ll be foraging in the woods.’ Photograph: Kevin Frayer/Getty Images
Here are the week’s leading indicators.
As a human being, I’m increasingly alarmed that these are just irrelevant numbers that have little or no bearing on how well we are really doing.
Continue reading
Crude financial instruments dominate the headlines, but it’s metrics like grain price and inequality ratio that really reflect the world we live in
‘Carbon dioxide in the atmosphere goes up every year. If this carries on for another couple of decades, people won’t be inspecting their portfolios – they’ll be foraging in the woods.’ Photograph: Kevin Frayer/Getty Images
Here are the week’s leading indicators.
- The Dow Jones industrial average topped 20,000 points for the first time.
- British GDP grew 0.6% in the final quarter of 2016.
- The FTSE 100 and Germany’s DAX 30 persisted close to record highs, while US GDP softened slightly.
As a human being, I’m increasingly alarmed that these are just irrelevant numbers that have little or no bearing on how well we are really doing.
Continue reading
Wednesday, 28 January 2015
A slower recovery
an article by Robert Peston for BBC Business News
There has been a slowdown in the British economy, driven by weaker construction, manufacturing and energy production - although it would be premature to see this as an end to the recovery.
Continue reading
There has been a slowdown in the British economy, driven by weaker construction, manufacturing and energy production - although it would be premature to see this as an end to the recovery.
Continue reading
Friday, 8 February 2013
euro area seasonally adjusted deficit
Eurostat Statistics in focus Issue number 3/2013
Growth in the EU-27 deficit influenced by a one-off operation in the United Kingdom in the second quarter of 2012
Eurostat publishes for the first time seasonally adjusted and working day adjusted quarterly data on government revenue, expenditure and surplus (+)/ deficit (-) for some Member States and the EU aggregates, thus expanding on the previous publication, which covered only EU aggregates.
This publication is based on data transmitted to Eurostat at the end of December 2012 and includes data coverage of the first three quarters of 2012. It complements the press release on quarterly debt.
In the third quarter of 2012, the seasonally adjusted general government deficit to GDP ratio stood at -4.0% in the euro area (EA-17) and -4.4% in the European Union (EU-27).
In the previous quarter it stood at -4.0% in the EA-17 and -3.2% in the EU-27. EU-27 and EA-17 general government total revenue amounted to 44.8 % and 46.8 % of GDP respectively, while total expenditure stood at 49.2 % and 50.8 % of GDP.
Full text (PDF 4pp)
Growth in the EU-27 deficit influenced by a one-off operation in the United Kingdom in the second quarter of 2012
Eurostat publishes for the first time seasonally adjusted and working day adjusted quarterly data on government revenue, expenditure and surplus (+)/ deficit (-) for some Member States and the EU aggregates, thus expanding on the previous publication, which covered only EU aggregates.
This publication is based on data transmitted to Eurostat at the end of December 2012 and includes data coverage of the first three quarters of 2012. It complements the press release on quarterly debt.
In the third quarter of 2012, the seasonally adjusted general government deficit to GDP ratio stood at -4.0% in the euro area (EA-17) and -4.4% in the European Union (EU-27).
In the previous quarter it stood at -4.0% in the EA-17 and -3.2% in the EU-27. EU-27 and EA-17 general government total revenue amounted to 44.8 % and 46.8 % of GDP respectively, while total expenditure stood at 49.2 % and 50.8 % of GDP.
Full text (PDF 4pp)
Thursday, 20 December 2012
Hooray for GDP!
an article published in CentrePiece Volume 17 Issue 3 (Winter 2012)
The idea of having GDP growth as the main target of economic policy has been under attack in recent years. Nicholas Oulton answers some of the criticisms and argues that continued GDP growth would be good for the UK – and not just in the short term to reduce high levels of unemployment.
This paper was originally published in June 2012 as a submission to the LSE Growth Commission
Abstract
Should raising the growth rate of GDP per capita be a policy goal of governments in general, and of the British government in particular? Many people would say no, for the following reasons:
Full text (PDF 26pp)
The idea of having GDP growth as the main target of economic policy has been under attack in recent years. Nicholas Oulton answers some of the criticisms and argues that continued GDP growth would be good for the UK – and not just in the short term to reduce high levels of unemployment.
This paper was originally published in June 2012 as a submission to the LSE Growth Commission
Abstract
Should raising the growth rate of GDP per capita be a policy goal of governments in general, and of the British government in particular? Many people would say no, for the following reasons:
- GDP is hopelessly flawed as a measure of welfare;
- Growing GDP is pointless since most people don’t benefit;
- Raising GDP per capita is pointless as it doesn’t make people any happier; and
- The planet is finite, so further growth of GDP (at least in rich countries) is not feasible anyway.
Full text (PDF 26pp)
Monday, 17 December 2012
GDP per capita varied by one to six across the Member States in 2011
via Eurostat News releases (180/2012 - 13 December 2012)
In 2011, the Gross Domestic Product (GDP) per capita in Luxembourg, expressed in purchasing power standards (PPS), was more than two and a half times the EU27 average.
The Netherlands, Ireland, Austria, Sweden, Denmark and Germany were between around 20% and 30% above the EU27 average, while Belgium and Finland were between 10% and 20% above average.
The United Kingdom and France registered GDP per capita nearly 10% above the EU27 average, while Italy and Spain were around the average.
Full text (PDF 3pp)
In 2011, the Gross Domestic Product (GDP) per capita in Luxembourg, expressed in purchasing power standards (PPS), was more than two and a half times the EU27 average.
The Netherlands, Ireland, Austria, Sweden, Denmark and Germany were between around 20% and 30% above the EU27 average, while Belgium and Finland were between 10% and 20% above average.
The United Kingdom and France registered GDP per capita nearly 10% above the EU27 average, while Italy and Spain were around the average.
Full text (PDF 3pp)
Friday, 22 June 2012
Government deficit improves in all quarters of 2011
via Eurostat Statistics in focus Issue Number 25/2012
In 2011Q4 seasonally adjusted general government deficit stood at -4.5% and -3.8% of GDP in the EU-27 and EA-17 respectively.
In recent years Eurostat has significantly expanded the range of integrated quarterly data on government finances available, providing a timely and increasingly high quality picture of the evolution of government finances in the EU. The data presented in this publication reflect both non-financial and financial transactions and cover all European Union (EU-27) countries. This publication is based on data transmitted to Eurostat at the end of March 2012 and includes data coverage of all quarters of 2011.
Full text (PDF 8pp)
In 2011Q4 seasonally adjusted general government deficit stood at -4.5% and -3.8% of GDP in the EU-27 and EA-17 respectively.
In recent years Eurostat has significantly expanded the range of integrated quarterly data on government finances available, providing a timely and increasingly high quality picture of the evolution of government finances in the EU. The data presented in this publication reflect both non-financial and financial transactions and cover all European Union (EU-27) countries. This publication is based on data transmitted to Eurostat at the end of March 2012 and includes data coverage of all quarters of 2011.
Full text (PDF 8pp)
Tuesday, 3 April 2012
The Happy Planet Index asks a new sort of question
via the new economics foundation by Juliet Michaelson
Its critics are keen to paint it as a straightforward happiness measure, but the HPI is much more than that.
Lara Hoffmans, writing in Forbes, has been casting a sceptical eye over our Happy Planet Index (HPI), under a wonderfully titled article 'Give Me Tacocopter Or Give Me Death!'. (She couldn’t contemplate living in a country without the prospect of taco delivery via unmanned helicopter – and yes, this is actually something being developed in the US.)
For those not familiar with it, the HPI is not a straightforward happiness measure. It is an efficiency indicator, showing how much well-being countries achieve per unit of resources they consume. Instead of using GDP as a measure of output it uses average life expectancy and well-being as the end product of a nation. And it uses the resources of the planet that we all share as a fundamental input, because they are vital and finite. It is a global index with scores for nearly 150 countries that we produce every three years, with the next release coming out this June, in the run up to the UN’s Rio +20 conference.
Read more
Its critics are keen to paint it as a straightforward happiness measure, but the HPI is much more than that.
Lara Hoffmans, writing in Forbes, has been casting a sceptical eye over our Happy Planet Index (HPI), under a wonderfully titled article 'Give Me Tacocopter Or Give Me Death!'. (She couldn’t contemplate living in a country without the prospect of taco delivery via unmanned helicopter – and yes, this is actually something being developed in the US.)
For those not familiar with it, the HPI is not a straightforward happiness measure. It is an efficiency indicator, showing how much well-being countries achieve per unit of resources they consume. Instead of using GDP as a measure of output it uses average life expectancy and well-being as the end product of a nation. And it uses the resources of the planet that we all share as a fundamental input, because they are vital and finite. It is a global index with scores for nearly 150 countries that we produce every three years, with the next release coming out this June, in the run up to the UN’s Rio +20 conference.
Read more
Wednesday, 4 January 2012
How Much Do Educational Outcomes Matter in OECD Countries?
an article by Eric A. Hanushek and Ludger Woessman (Hoover Institution, Stanford University, NBER and CESifo; University of Munich, Ifo Institute for Economic Research, CESifo and IZA) published in Economic Policy Number 67 (July 2011)
Summary
Between 1960 and 2000, three OECD countries averaged more than four percent annual growth in per-capita GDP, while two averaged less than 1.5 percent. Despite extensive investigations of the determinants of long-run economic growth, little is known about why some developed countries have grown so much faster than others. A number of studies over the past decade have shown that human capital as measured by cognitive skills explains a significant portion of the difference in growth rates between developed and developing countries. We show that cognitive skills also can explain differences in growth within just the OECD. We then provide three innovations on past analyses.
First, we demonstrate that a wide range of measures of economic institutions have no significant relationship with long-run OECD growth once cognitive skills are accounted for.
Second, even though tertiary education is often thought to be the big advantage of developed countries, there is little evidence that it explains differential growth. In fact, the alternative of measuring cognitive skills suggests that the top end of the human capital distribution is more important in developing countries than in OECD countries.
Third, we use the estimated growth models to simulate the economic impact of improved educational outcomes.
The results suggest that the OECD as a whole could gain (in present value terms) $90-275 trillion from implementation of reform programs that bring human capital in the OECD to higher levels (but ones currently observed within the OECD). We close by discussing evidence on which education policy reforms may be able to bring about the required improvements in educational outcomes.
Full text (PDF 65pp) contains a number of data tables and formulae supporting the hypothesis.
Summary
Between 1960 and 2000, three OECD countries averaged more than four percent annual growth in per-capita GDP, while two averaged less than 1.5 percent. Despite extensive investigations of the determinants of long-run economic growth, little is known about why some developed countries have grown so much faster than others. A number of studies over the past decade have shown that human capital as measured by cognitive skills explains a significant portion of the difference in growth rates between developed and developing countries. We show that cognitive skills also can explain differences in growth within just the OECD. We then provide three innovations on past analyses.
First, we demonstrate that a wide range of measures of economic institutions have no significant relationship with long-run OECD growth once cognitive skills are accounted for.
Second, even though tertiary education is often thought to be the big advantage of developed countries, there is little evidence that it explains differential growth. In fact, the alternative of measuring cognitive skills suggests that the top end of the human capital distribution is more important in developing countries than in OECD countries.
Third, we use the estimated growth models to simulate the economic impact of improved educational outcomes.
The results suggest that the OECD as a whole could gain (in present value terms) $90-275 trillion from implementation of reform programs that bring human capital in the OECD to higher levels (but ones currently observed within the OECD). We close by discussing evidence on which education policy reforms may be able to bring about the required improvements in educational outcomes.
Full text (PDF 65pp) contains a number of data tables and formulae supporting the hypothesis.
Tuesday, 3 January 2012
GDP per capita varied by more than six to one across the EU in 2010: …
Consumption and price levels differed by more than three to one
As in previous years, Bulgaria remains the country with the lowest level of Gross Domestic Product (GDP) per capita among all EU Member States, at less than half the EU average. The Netherlands was 33 percent above that average, surpassed only by Luxembourg. Levels of Actual Individual Consumption (AIC) were somewhat more homogeneous, but still showed very substantial differences across EU Member States. The country with the highest price level remains Denmark.
Full report Issue number 64/2011 via Eurostat Statistics in focus (PDF 8pp)
As in previous years, Bulgaria remains the country with the lowest level of Gross Domestic Product (GDP) per capita among all EU Member States, at less than half the EU average. The Netherlands was 33 percent above that average, surpassed only by Luxembourg. Levels of Actual Individual Consumption (AIC) were somewhat more homogeneous, but still showed very substantial differences across EU Member States. The country with the highest price level remains Denmark.
Full report Issue number 64/2011 via Eurostat Statistics in focus (PDF 8pp)
Wednesday, 16 November 2011
Bank of England Quarterly Bulletin September 2011
and no, it’s not the bank – it’s me being shamefully neglectful of my “fetch” list
Summary of Quarterly Bulletin 2011 Q3 (Volume 51 Number 3)
Recent economic and financial developments
Markets and operations (page 184)
This article reviews developments in sterling financial markets, including the Bank’s official operations, between the 2011 Q2 Quarterly Bulletin and 26 August 2011. The article also summarises market intelligence on selected topical issues relating to market functioning.
Research and analysis
Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank or of MPC members.
Monetary Policy Roundtable (page 258)
On 24 June, the Bank of England and the Centre for Economic Policy Research hosted the sixth Monetary Policy Roundtable. These events are intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. As always, participants included a range of economists from private sector financial institutions, academia and public sector bodies. At this sixth Roundtable there were two discussion topics: will the protracted period of above-target inflation lead to further upward pressure on prices?; and how will the contrasting fortunes of the household and corporate sectors play out?
Speeches
Full document (PDF 98pp)
Summary of Quarterly Bulletin 2011 Q3 (Volume 51 Number 3)
Recent economic and financial developments
Markets and operations (page 184)
This article reviews developments in sterling financial markets, including the Bank’s official operations, between the 2011 Q2 Quarterly Bulletin and 26 August 2011. The article also summarises market intelligence on selected topical issues relating to market functioning.
Research and analysis
Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank or of MPC members.
- The United Kingdom’s quantitative easing policy: design, operation and impact (page 200)
By Michael Joyce, Matthew Tong and Robert Woods of the Bank’s Macro Financial Analysis Division.
In response to the intensification of the financial crisis in Autumn 2008, the Bank of England, in common with other central banks, loosened monetary policy using both conventional and unconventional policy measures. In the United Kingdom, the principal element of these unconventional measures was the policy of asset purchases financed by central bank money, so-called quantitative easing (QE). Over the period March 2009 to January 2010, £200 billion of assets were purchased, overwhelmingly made up of government securities, representing around 14% of annual GDP. This article reviews the motivation for these central bank asset purchases and describes how they were implemented. It goes on to review a range of evidence for the impact of the asset purchases made to date, both on financial markets and more widely on the economy. While there is considerable uncertainty about the magnitudes, the evidence suggests that QE asset purchases have had economically significant effects.
- Bank resolution and safeguarding the creditors left behind (page 213)
By Geoffrey Davies and Marc Dobler of the Bank’s Special Resolution Unit.
Not for the first time, the global banking crisis illustrated the vulnerability of banks to a loss of confidence by their depositors, other creditors and counterparties. The experience highlighted the need to have special arrangements for dealing with failing banks — a ‘special resolution regime’ — that provides the authorities with the tools necessary to reduce the systemic risks arising from a bank’s failure while at the same time limiting the taxpayers’ exposure to the costs. The United Kingdom’s own Special Resolution Regime for dealing with failing banks and building societies was born out of the difficulties in dealing with the failure of Northern Rock in the autumn of 2007.
- Developments in the global securities lending market (page 224)
By Matthew Dive of the Bank’s Payments and Infrastructure Division, Ronan Hodge and Catrin Jones of the Bank’s Financial Institutions Division and James Purchase of the Bank’s Sterling Markets Division.
Securities lending plays an important role in supporting financial markets. For example, it can improve market liquidity, potentially reducing the cost of trading and increasing market efficiency. But by increasing the interconnections between institutions it can pose potential risks to financial stability, which are exacerbated by a lack of transparency in the securities lending market. Since the onset of the financial crisis, market participants have attempted to address some of these risks, and fundamental changes to market infrastructure are being discussed, such as the use of central counterparties. New regulations under way to improve the resilience of the financial system may also impact both the risks to financial stability from securities lending and its benefits.
- Measuring financial sector output and its contribution to UK GDP (page 234)
By Stephen Burgess of the Bank’s Conjunctural Assessment and Projections Division.
In the decade before the financial crisis, the UK financial services sector grew more than twice as fast as the UK economy as a whole. But there are many conceptual difficulties associated with measuring output in finance. This article describes the contribution of the financial sector to GDP and assesses the uncertainty around recent estimates. There is some evidence that financial services output grew less quickly over the recent past than the official data suggest, although this probably had only a small impact on the rate of growth of overall GDP.
- The Money Market Liaison Group Sterling Money Market Survey (page 247)
- By Ben Westwood of the Bank’s Sterling Markets Division.
The Bank of England recently initiated a new survey of the sterling money market on behalf of the Money Market Liaison Group. This market — where short-term wholesale borrowing and lending in sterling takes place — plays a central role in the Bank’s pursuit of its monetary and financial stability objectives. Participants include banks, other financial institutions and non-financial companies, who use the market to manage their liquidity, by investing over short periods and raising short-term funding. The survey supplements the Bank’s long-standing gathering of market intelligence and will increase public understanding of the market. Over time, it is expected to help identify emerging structural trends in the market, helping policymakers assess the impact of their actions on the behaviour of market participants. This article introduces and presents the results of the inaugural survey launched in May 2011.
- An estimated DSGE model of energy, costs and inflation in the United Kingdom
- The impact of permanent energy price shocks on the UK economy
- Evolving UK and US macroeconomic dynamics through the lens of a model of deterministic structural change
- Preferred-habitat investors and the US term structure of real rates
Monetary Policy Roundtable (page 258)
On 24 June, the Bank of England and the Centre for Economic Policy Research hosted the sixth Monetary Policy Roundtable. These events are intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. As always, participants included a range of economists from private sector financial institutions, academia and public sector bodies. At this sixth Roundtable there were two discussion topics: will the protracted period of above-target inflation lead to further upward pressure on prices?; and how will the contrasting fortunes of the household and corporate sectors play out?
Speeches
Full document (PDF 98pp)
Friday, 30 September 2011
Convergence and disparities in regional Gross Domestic Product
Issue number 46/2011 via Eurostat Statistics in focus
Regional Gross Domestic Product (GDP) in purchasing power standards (PPS) per capita has been catching up significantly in many of the less prosperous regions of the EU since the year 2000. Early data from some Member States suggest that rural areas were less affected by the economic downturn in 2008 and 2009 than high-income regions and areas with a high dependence on exports, financial services or tourism. However, regional disparities are increasing inside new Member states.
The 8-page PDF contains a couple of maps of Europe which would be better viewed on a large screen – preferably through a projector.
Regional Gross Domestic Product (GDP) in purchasing power standards (PPS) per capita has been catching up significantly in many of the less prosperous regions of the EU since the year 2000. Early data from some Member States suggest that rural areas were less affected by the economic downturn in 2008 and 2009 than high-income regions and areas with a high dependence on exports, financial services or tourism. However, regional disparities are increasing inside new Member states.
The 8-page PDF contains a couple of maps of Europe which would be better viewed on a large screen – preferably through a projector.
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