The evolving effectiveness of UK’s monetary policy

Colin Ellis, Haroon Mumtaz, Pawel Zabczyk 06 August 2014

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Over the past five decades, major industrialised economies underwent deep structural changes. These typically included dramatic shifts in macroeconomic policy and globalisation-induced changes in competition, technological advances, and financial innovation. This raises several concerns for policymakers, including whether the channels through which monetary policy affects the economy have changed over time, and what that might mean for how policy should be conducted.

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Topics:  Europe's nations and regions Monetary policy

Tags:  inflation targeting, UK, policy shocks

It’s time to deploy macroprudential policy: results from the Centre for Macroeconomics July Survey

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan 08 July 2014

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The Centre for Macroeconomics (CFM) – an ESRC-funded research centre including the University of Cambridge, the London School of Economics (LSE), University College London (UCL) and the National Institute of Economic and Social Research (NIESR) – is today publishing the results of its fourth monthly survey.1 The surveys are designed to inform the public about the views held by leading UK-based macroeconomists on important questions about macroeconomics and public policy.

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Topics:  Macroeconomic policy

Tags:  UK, housing market, Macroprudential policy

Revisiting the pain in Spain

Paul De Grauwe 07 July 2014

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The different macroeconomic adjustment dynamics in Spain – a member of a monetary union – and the UK – a stand-alone country – is stark. Paul Krugman popularised this contrast in his New York Times blog with the title “The Pain in Spain” (Krugman 2009, 2011), and commented on my own analysis in De Grauwe (2011).

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Topics:  Europe's nations and regions Global crisis Macroeconomic policy

Tags:  ECB, monetary policy, euro, EMU, Spain, monetary union, fiscal policy, UK, government debt, austerity, EZ crisis, Outright Monetary Transactions, currency depreciation

The great British jobs and productivity mystery

João Paulo Pessoa, John Van Reenen 28 June 2014

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With some economic recovery having finally got underway, the UK is still feeling the repercussions of the so-called ‘Great Recession’. National output, as measured by GDP, fell by over 7% from its peak in January 2008 – the biggest fall since the inter-war years – and only returned to its pre-crisis level in April 2014 (NIESR 2014). This has been the slowest recovery in this century (see Figure 1).

Figure 1. The profile of recession and recovery

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Topics:  Europe's nations and regions

Tags:  unemployment, productivity growth, UK, Great Recession

Why monetary policy matters: New UK narrative evidence

James Cloyne, Patrick Hürtgen 15 May 2014

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In recent decades, central banks around the world have predominantly used interest rates as their main monetary policy instrument. And while the zero lower bound has necessitated a range of unconventional monetary policies, many central banks clearly still intend to use interest rates as their preferred tool as their economies recover. A range of empirical estimates have emerged from the academic literature over several decades putting the effect on prices and output of a one percentage point increase in interest rates between 0.5% and 1%.

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Topics:  Monetary policy

Tags:  monetary policy, UK, interest rates changes

Falling real wages in the UK

David Blanchflower, Stephen Machin 12 May 2014

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There have been unprecedented falls in real wages in the UK since the start of the recession triggered by the financial crisis of 2008. This did not happen in previous economic downturns – median real wage growth slowed down or stalled, but it did not fall. Indeed, in past recessions, almost all workers in both the lowest and highest deciles of the wage distribution experienced growing real wages. It was the unemployed who experienced almost all the pain – they lost their jobs and much of their incomes, and many were unemployed for a long time.

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Topics:  Labour markets Poverty and income inequality

Tags:  US, unemployment, wages, Inequality, UK, Great Recession, real wages

Tackling long-term unemployment: The research evidence

Barbara Petrongolo 27 April 2014

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During the Great Recession, UK unemployment increased from about 5% to 8%, with a disproportionate increase in the number of long-term unemployed. Of the nearly 2.5 million people who are currently unemployed, more than a third have been out of work for over 12 months (up from a fifth at the start of the recession), and a fifth have been out of work for over two years. The rising incidence of long-term unemployment is a distinctive feature of virtually all recessions, as job-finding rates tend to remain persistently low even after the first signs of a recovery.

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Topics:  Global crisis Labour markets

Tags:  recession, UK, long-term unemployment

UK macroeconomists see potential for higher growth: results of the first Centre for Macroeconomics survey

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan 14 April 2014

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The Centre for Macroeconomics (CFM) – a partnership between the University of Cambridge, the London School of Economics (LSE), University College London (UCL), the Bank of England and the National Institute of Economic and Social Research (NIESR) – is today publishing the results of a new monthly survey to inform the public about the views held by leading UK based macroeconomists on important questions about macroeconomics and public policy.1 The survey will shed light on the extent to which there is agreement or disagreement on these questions among our panel o

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Topics:  Europe's nations and regions Global crisis

Tags:  economic growth, UK, output gap

Say on pay in the UK: Modest effect, even after the crisis

Ian Gregory-Smith, Steve Thompson, Peter Wright 24 March 2014

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The extensive academic literature on the growth of executive compensation has tended to polarise around one of two positions: the rents-capture view and the optimal contracting approach. These analyses lead to very different positions on the value of a ‘say on pay’ policy:

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Topics:  Frontiers of economic research Labour markets Microeconomic regulation Poverty and income inequality

Tags:  voting, UK, executive pay, corporate governance, Executive compensation

What can company data tell us about financing and investment decisions?

Katie Farrant, Magda Rutkowska, Konstantinos Theodoridis 09 February 2014

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Following the financial crisis, UK companies revised their spending and financing decisions dramatically. They reduced investment by around 13% in real terms between 2008 and 2012 (Besley and Van Reenen 2013, Haddow et al. 2013). But during that same period, corporate bond issuance by UK companies was strong, with record corporate bond issuance in 2012. Taken at face value, this might appear puzzling, as one might expect strong bond issuance to feed into stronger investment.

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Topics:  Financial markets Global crisis

Tags:  UK, investment decline, corporate bond issuance

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