Karl Walentin, 11 September 2014

Central banks have resorted to various unconventional monetary policy tools since the onset of the Global Crisis. This column focuses on the macroeconomic effects of the Federal Reserve’s large-scale purchases of mortgage-backed securities – in particular, through reducing the ‘mortgage spread’ between interest rates on mortgages and government bonds at a given maturity. Although large-scale asset purchases are found to have substantial macroeconomic effects, they may not necessarily be the best policy tool at the zero lower bound.

Marcus Miller, Lei Zhang, 10 September 2014

During the Great Moderation, inflation targeting with some form of Taylor rule became the norm at central banks. This column argues that the Global Crisis called for a new approach, and that the divergence in macroeconomic performance since then between the US and the UK on the one hand, and the Eurozone on the other, is partly attributable to monetary policy differences. The ECB’s model of the economy worked well during the Great Moderation, but is ill suited to understanding the Great Recession.

Jonathan Bridges, David Gregory, Mette Nielsen, Silvia Pezzini, Amar Radia, Marco Spaltro, 02 September 2014

Since the Global Crisis, support has grown for the use of time-varying capital requirements as a macroprudential policy tool. This column examines the effect of bank-specific, time-varying capital requirements in the UK between 1990 and 2011. In response to increased capital requirements, banks gradually increase their capital ratios to restore their original buffers above the regulatory minimum, reducing lending temporarily as they do so. The largest effects are on commercial real estate lending, followed by lending to other corporates and then secured lending to households.

Colin Ellis, Haroon Mumtaz, Pawel Zabczyk, 06 August 2014

This column reports on empirical evidence showing that monetary policy shocks in the UK had a bigger impact on inflation, equity prices, and the exchange rate during the inflation targeting period. Related changes in the transmission of policy shocks to bond yields point to more efficient management of long run inflation expectations.

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

How should UK policy-makers respond to potential dangers to the economy from the housing market? As this column reports, a majority of respondents to the fourth monthly survey of the Centre for Macroeconomics (CFM) think that house price dynamics do pose a risk to the UK’s recovery; and that macroprudential tools rather than traditional interest rate policy should be deployed to deal with this risk.

Paul De Grauwe, 07 July 2014

There has been a stark contrast between the experiences of Spain and the UK since the Global Crisis. This column argues that although the ECB’s Outright Monetary Transactions policy has been instrumental in reducing Spanish government bond yields, it has not made the Spanish fiscal position sustainable. Although the UK has implemented less austerity than Spain since the start of the crisis, a large currency depreciation has helped to reduce its debt-to-GDP ratio

João Pessoa, John Van Reenen, 28 June 2014

The fall in productivity in the UK following the Great Recession was particularly bad, whereas the hit to jobs was less severe. This column discusses recent research exploring this puzzle. Although the mystery has not been fully solved, an important part of the explanation lies in the flexibility of wages combined with very low investment.

James Cloyne, Patrick Hürtgen, 15 May 2014

The effects of interest-rate changes on output and inflation could be much larger than previously thought. Such evidence was suggested by Romer and Romer in their analysis of the US. This column provides similar estimates for the UK based on a novel real-time dataset. In response to a 1% increase in the interest rate, output declines by 0.6% and inflation falls by one percentage point after two to three years.

David Blanchflower, Stephen Machin, 12 May 2014

The pain of the UK’s Great Recession has been spread more evenly than previous downturns, with falling real wages across the distribution. This column asks why this happened, how it compares with the US experience, and what the prospects are for recovering lost wage gains.

Barbara Petrongolo, 27 April 2014

Long-term unemployment in the UK increased substantially after the recent recession. Many policy interventions have attempted to address this problem. The UK’s long-term unemployed face tougher requirements in return for their benefits – community work, training programmes, or daily visits to the Jobcentre. This column tries to assess the likely success of the UK government’s strategy by surveying the effectiveness of the ‘sticks’ and ‘carrots’ of active labour market policies.

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

Fears that the financial crisis will have a significant negative impact on long-term UK economic growth are unfounded, according to a majority of the UK macroeconomics profession surveyed by the Centre for Macroeconomics (CFM). What’s more, the inaugural CFM survey, summarised in this column, indicates some optimism about the UK’s immediate capacity for higher growth: while roughly half of the respondents share the views of the Office of Budget Responsibility, the other half is substantially more optimistic about the capacity for the economy to recover.

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

In 2003, the UK adopted a ‘say on pay’ policy, whereby quoted companies’ executive compensation offers have to be put to a shareholder vote. This column presents evidence that this policy has had a relatively modest impact on executive pay. A 10% increase in compensation is associated with an increase in shareholder dissent against the proposal of just 0.2%. However, remuneration committees representing the more highly rewarded CEOs are quite sensitive to dissent, provided it exceeds a critical threshold of about 10%. Shareholders do not appear more anxious about pay since the crisis.

Katie Farrant, Magda Rutkowska, Konstantinos Theodoridis, 09 February 2014

The investment decline in the UK that has followed after the recent crisis is hardly a surprise. What is baffling is that at the same time, corporate bond issuance has remained strong. This column discusses this puzzling pattern and provides possible explanations for it. Heterogeneity among companies is one possible argument, where firms with capital market access invest, and those without – do not. However, evidence from 2012 shows that investment across companies with capital fell as well. Thus, other factors – such as the increased financial uncertainty – could play a role in the investment decisions of companies.

Katerina Lisenkova, 10 January 2014

Efforts to limit immigration are being implemented in many rich nations. Restricting immigration to these advanced ageing economies could be an economic boon or bane. This column presents recent work examining the labour market and fiscal impacts of restricting immigration, taking the UK government’s stated goal as an example. The results suggest that a significant reduction in net migration would have strong negative effects on the UK economy.

Christian Dustmann, Tommaso Frattini, 13 November 2013

The immigration debate has focused on immigrants’ net fiscal impact – whether they receive more in welfare payments and other benefits than they pay back in taxes. This column summarises research showing that – contrary to popular belief – immigrants who arrived in the UK since 2000 have contributed far more in taxes than they have received in benefits. Compared with natives of the same age, gender, and education level, recent immigrants are 21% less likely to receive benefits. 

David Cobham, 16 September 2013

The Bank of England is searching for an alternative activist monetary policy. This column argues that inflation targeting is better than previous frameworks but there is room for improvement. Faced with exchange rate and housing prices problems, the Bank was unable to modify the framework to suit. To avoid such problems, the Bank should be given more goal-independence as well as instrument-independence.

Charlotte Geay, Sandra McNally, Shqiponja Telhaj, 14 September 2013

Are children who are non-native speakers making education worse for native speakers? Presenting new research on England, this column uses two different research strategies showing that there are, in fact, no spillover effects. These results support other recent studies on the subject. The growing proportion of non-native English speakers in primary schools should not be a cause for concern.

Holger Görg, Marina-Eliza Spaliara, 13 September 2013

International trade declined dramatically during the Global Crisis. This column focuses on UK firms that exited from exporting during the Global Crisis. The evidence clearly points to the importance of financial factors. Firms that exited were more heavily indebted, less liquid, and faced higher firm-specific interest rates.

Abigail Haddow, Chris Hare, John Hooley, Tamarah Shakir, 27 August 2013

Economic uncertainty is not good for GDP growth. This column presents a new, UK-specific measure of economic uncertainty. It shows that UK economic uncertainty is now at historically high levels and that it has been unusually persistent in recent years. There is evidence that elevated uncertainty has been a factor restraining the UK recovery. What happens to uncertainty going forward will be important for growth.

Alan Taylor, 20 July 2013

Recent austerity policies have been guided by ideology rather than research. This column discusses research that reconciles disparate estimates of fiscal multipliers in the literature. It finds that common identification assumptions are problematic. Matching methods based on propensity scores show how contractionary austerity really is, especially in economies operating below potential.

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