bluuebunny/crossref_metadata_2025 huggingface dataset:
Two Aspects of the Monetary Debate
Authors: Artis M.J. , Nobay A.R.
Published: March 2007

It is now ten years since the publication of the Radcliffe Report (Report of the Committee on the Working of the Monetary System (Cmnd 827)), and once again the role of monetary operations is in the forefront of discussion of macro-economic policy.
Notes on Statistics of Manpower Costs and Unemployment in Major Industrial Countries
Authors: Jones F.K. , Hays S. , Campbell-Boross L.F.
Published: March 2007

This note outlines some of the problems in measuring short-run changes in manpower costs and lists some of the statistical series now available for major industrial countries. Information about changes in the cost of labour provides a useful complement to data about export prices for analysis of the development of a country's competitive position. Each type of indicator has its own drawbacks. For example, for some exports prices are set by competitive world markets and a change in competitiveness may take the form of a change in relative profits rather than a change in price. Moreover, there are well-known difficulties in comparing national indices for prices or unit/average values. For production costs per unit of output, too, there are problems of compilation. There are also problems of interpretation, particularly over very short periods, because the measures can be very erratic. In the field of unit costs it has become usual to focus attention on changes in manpower costs, variously defined, partly because such costs are the most important, and partly because costs of materials (to the extent that they are set by world prices) tend to move more closely in line as between different countries.
Estimates of the Static Balance of Payments and Welfare Costs of United Kingdom Entry Into the Common Market
Authors: Miller Marcus H.
Published: March 2007

The purpose of this paper is to bring together in comparable form some published and unpublished estimates of the effects on the United Kingdom balance of payments of entry into the EEC, and the resource costs associated with them. The effects referred to are the ‘static’ effects measured at the end of the transition period, no account being taken of any ‘dynamic’ effects, nor of the transitional arrangements.
Inflation, Growth, and Economic Policy in the Medium-Term
Authors: Barker T. S. , Woodward V. H.
Published: March 2007

The development of a medium-term model of the British economy has proceeded in Cambridge continuously since 1960. Its purpose is summarised by the preface to the series of papers which describe the main research results: ‘The aim of the project is to study quantitatively in as great detail as possible the present structure and future prospects of the British economy, the possibilities of stimulating its rate of growth and the problems to which this would give rise.’[1] The model was always intended to help in planning and policy making and two sets of alternative projections of the economy, for 1970[4] and for 1972[5], have been published. In the last two years with the comprehensive incorporation of the fiscal system the model has been much more oriented towards economic policy making.
Medium-Term Forecasts Reassessed IV. Domestic Appliances
Authors: Smith R. J.
Published: March 2007

Future demand for domestic appliances in the United Kingdom has been considered in two previous articles in the National Institute Economic Review. The first, published in 1960, discussed prospects for the new decade; the second, which appeared in 1967, first compared the original forecasts with actual developments up to that time and then provided a fresh appraisal of the outlook, extended to 1980. The present article contains a further reassessment, covering the same period, in the light of more recent experience.
Errors in National Institute Forecasts for the World Economy
Authors: Page S. A. B.
Published: March 2007

Previous articles(1) have examined the record of the National Institute's forecasts for the United Kingdom economy. This article assesses its forecasts for the economy of the world as a whole.
Coordination of Policy in the EEC
Authors: Broadbent Margaret J.
Published: March 2007

The most notable and best publicised achievements of the European Economic Community (EEC) have been in liberalising trade between its member countries. But apart from setting up the ‘common market’ from which it derives its popular name, the Treaty of Rome gave the Community the duty ‘to promote …. an harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the Member States belonging to it’. In addition to the elimination of barriers to the passage of goods between members and the establishment of a common agricultural policy and a common basis of trade with the outside world, the Treaty provided specifically for freedom of movement for persons, services and capital, a common transport policy, a system ensuring that competition should not be distorted, procedures for coordinating economic policies and remedying balance of payments disequilibria, the approximation of laws to the extent required for proper functioning of the common market, and a European Social Fund and European Investment Bank.
A Forecasting Model for the United Kingdom Invisible Account
Authors: Phillips P.
Published: March 2007

The National Institute has for some time prepared and published regular forecasts for periods up to 18 months ahead of the United Kingdom's balance of payments on the invisible items in the current account as well as visible trade. The results for the invisible items have compared fairly well with those for visible trade, perhaps because the latter have until recently been the more irregular and difficult to predict. Moreover the very stability of the invisible balance during the 1960s suggests that either many of the items involved are comparatively insensitive to changes in the general economic climate or the effects of such changes were largely offsetting. In neither case could regression analysis be expected to give wholly satisfactory results, particularly in view of the poor quality of some of the data. Nevertheless it seemed worth while to see whether some of the invisible items could with advantage be predicted by formal methods rather than, as in the past, by assessing current trends and making purely ad hoc allowances for such factors as the likely course of shipping freight rates, oil prices and the level of economic activity in the United Kingdom and overseas.
Mortgages: The Case for Index-Linking
Authors: Whitley J. D.
Published: March 2007

Much attention has been paid recently to the activities of building societies and their influence on the housing market. Criticism has been largely directed towards the destabilising effects of the present methods of financing house purchase, in which borrowing and lending rates tend to be ‘sticky’ with the result that the availability of mortgages goes through the familiar ‘feast and famine’ cycle.
The Innovation Process in the Gas Industry
Authors: Ray G.F. , Jones D.T.
Published: March 2007

This article traces the development in the British gas industry of pressures to innovate and of the industry's response, not in any great depth but as an illustration of the complexities of the innovation process and of the variety of factors which may typically be involved in bringing it to fruition. Innovation occurs within a given system; in order to understand why it occurred and the reasons for its success or failure it is important to observe the working of the system as a whole, the connections between the industry concerned and other sectors of the economy and the factors which encouraged or delayed innovative activity.
Earnings in the Public and Private Sectors 1950—1975
Authors: Dean A.J.H.
Published: March 2007

This article analyses the trend of earnings in the public and private sectors of the British economy from 1950 to 1975. It was found that public and private sector earnings moved closely together throughout the 1950s and 1960s but then diverged considerably in the early 1970s, with public sector earnings moving ahead of private sector earnings in an unprecedented fashion in 1974 and 1975; given the earlier stability in relative earnings, this movement might be temporary. There was a significant difference in the cyclical behaviour of the two series with public sector earnings generally increasing faster than private sector earnings during the downswing and vice versa during the upswing; this finding is consistent with the lesser exposure of the public sector to market pressures. Incomes policy does not appear to have affected relative earnings in any systematic way.
Unemployment Among School Leavers: An Analysis of the Problem
Authors: Dean A.J.H.
Published: March 2007

This article examines the problem of unemployment among school leavers. It is shown that although the summer peak in such unemployment has reached record levels in recent years this remains a largely temporary phenomenon. However, longer term unemployment among school leavers is now becoming a serious problem. Though the Government's present measures will relieve the problem somewhat they provide a temporary palliative rather than a longer term solution.
Sterling Exchange Rates 1951—1976: a Casselian Analysis
Authors: Batchelor R.A.
Published: March 2007

This article presents two models of sterling exchange rates, for which the starting-point is Cassel's synthesis of the purchasing power parity and the asset demand theory of exchange rate determination. The first model generates estimates of equilibrium exchange rates in 1970; the second is designed to explain subsequent monthly deviations of actual rates from these notional 1970 rates and so to provide a system for short-term forecasting of ‘effective’ exchange rates in terms of variables defined in the National Institute's larger model of the economy. Monthly forecasting equations for other major currencies are also estimated and the predictive power of the monthly model is tested—with encouraging results—over the period May-November 1976.
The ‘Real’ Price of Primary Products
Authors: Ray G.F.
Published: March 2007

This article traces the course of world commodity prices back to the middle of the 19th century and attempts to assess the changes in their purchasing value by deflating them by the export prices of manufactured goods. The purchasing power of commodity prices was in decline over long periods but they usually regained their earlier real value, or improved on it, in powerful upsurges of which the 1972-74 boom was the most recent; it was also unique in peacetime and, though with fluctuations, the purchasing value of commodities has since remained at a relatively high level.
National Institute Gross Output Forecasts: A Comparison With US Performance
Authors: Osborn Denise R.
Published: March 2007

This article aims to compare the National Institute's forecasting performance with that of United States forecasters. Because of the magnitude of this task, we restrict our attention to forecasts of the principal output measure in each country—real gross domestic product in the United Kingdom and real gross national product in the United States. Results for US forecasters are taken from the detailed study by McNees (1975), where there is also information on the methods employed by these forecasters.
An Assessment and Comparison of Two Niesr Econometric Model Forecasts
Authors: Osborn Denise R. , Teal Francis
Published: March 2007

This article presents a methodology for decomposing ex ante forecasting error into exogenous variable error, data revision error, model error and judgement error. This methodology is applied to the forecasts made by the National Institute in February 1975 and February 1976. The first section describes the methodology including the NIESR forecasting procedure. Then the NIESR model (with some of its problems) is discussed together with the data used in the study. The methodology for decomposing the forecasting error to 1975 is applied and a similar analysis presented for 1976. Some conclusions and a summary complete the article.
Structural Changes in the Economy, 1956-1978
Authors: Ray G.F.
Published: March 2007

The new official estimates, using 1975 constant prices, provide the basis for assessing the growth rates from 1956-7 to 1977-8 as well as the changing importance, i.e. weights, of the following parts of the British economy: the main economic sectors, the main industrial categories, the manufacturing industries, and the branches of mining and trans port and communications.
Britain's Trade and Exchange-Rate Policy
Authors: Major R.L.
Published: March 2007

The National Institute has launched a series of conferences on important issues of economic policy. The conference papers and accounts of the conference discussions are being published by Heinemann Educational Books. The first two books in the series, entitled Demand Management and De-industrialisation, were the outcome of conferences held in December 1977 and June 1978 respectively. The third book, of which this article gives a brief summary under the same title, appeared this month, following a conference in June 1979. The purpose of the conference was to provide a forum for discussion of the trade and exchange-rate policies which the United Kingdom should pursue domestically and advocate in the international arena, and the choice of topics reflects the attention recently devoted there to non-tariff barriers to trade, general economic relations between North and South, the European Monetary System, and its differing implications for debtor and creditor countries. Future studies will be conducted under the joint sponsorship of the National Institute, the Policy Studies Institute and the Royal Institute of International Affairs. The first under the new arrangement will take place next month, with ‘Britain in Europe’ as its theme. The series has been started with financial support from the Nuffield Foundation.
The Contribution of Science and Technology to the Supply of Industrial Materials
Authors: Ray G.F.
Published: March 2007

The world's non-renewable resources are obviously finite—and the renewable ones are also limited—and without scientific and technological advance mankind would long ago have been facing serious material shortages. Earlier anxieties, however, did not materialise since new materials have been discovered or new methods introduced to produce and process them. This study surveys the history of some three dozen materials which are new, or were ‘new’ at the time of their introduction in general use. Many of them were developed or discovered as the outcome of a need—wartime or market pressure—whilst others were the result of spontaneous and random scientific/technological push. The conclusion suggests that whilst history does not necessarily repeat itself in solving future problems of material shortages it provides basis for the hope that progress will overcome possibly emerging scarcities.
The Machine Tool Industry in Britain, Germany and the United States
Authors: Daly Anne , Jones Daniel T.
Published: March 2007

This article examines the problems of the machine tool industry in Britain by contrasting its performance and structure with the corresponding industry in Germany and the United States. The industry is one in which Britain's productivity, export performance and technology have lagged behind Germany and the United States since before the Second World War; these aspects are discussed in the first half of the article. The latter half considers how Britain's deficiencies in technical skills have affected the machine tool industry; the engineering industries as a whole are of course affected in varying degrees by similar factors.
The Controversy Over Rational Expectations
Authors: Mayes David G.
Published: March 2007

The purpose of this article is to examine in a non-technical manner the contribution of the hypothesis of rational expectations to the explanation of how people form expectations of the values of economic variables. In particular the article draws conclusions for what the hypothesis may and may not imply for the formation of macroeconomic policy in the United Kingdom. There is a short annotated biblography at the end of the article.
A Study of the Movements of Productivity in Individual Industries in the United Kingdom 1968-79
Authors: Wenban-Smith G.C.
Published: March 2007

This article examines the movement of output per employee in one hundred and sixty industries between 1968 and 1979. It concludes that the slowdown in productivity and output growth rates observed for aggregate manufacturing industry since 1973 was fairly typical of the experience of most individual industries; and that no shift in the relation between productivity and output growth could be identified.
Chapter II. The World Economy
Authors: Barrell R.J. , Gurney Andrew , Dulake Stephen
Published: March 2007

The most important factor affecting our view of long-term prospects is the potential effect of developments in Eastern Europe. Since our last forecast, which was completed three months ago on 9th November 1989 the political map of Europe has changed. The Czechs, Rumanians and Bulgarians appear to have joined the Poles and the Hungarians in the drive for democracy and more open markets. The collapse of the East German regime, and the gathering pace of the drive for unification with the FDR has been even more remarkable. Almost any possible outcome will change the prospects for growth and economic developments in the whole of the non-Communist world. We would argue that these effects will not just be confined to Continental Europe.
Why the Capital Account Matters
Authors: Pain Nigel , Westaway Peter
Published: March 2007

Most discussion of the balance of payments and its implications for exchange-rate prospects and economic policy falls into two distinct categories. Some authors focus on the current account alone while others argue that in a world of liberalised capital markets information from the volume of trade flows will simply be swamped by flows of highly mobile international capital. In this note we argue that both these viewpoints are too extreme; in aggregate both the current and capital accounts will matter.
International Labour Costs in Manufacturing, 1960-88
Authors: Ray George F.
Published: March 2007

Comparative labour costs in the manufacturing industries have been analysed in four previous issues of this Review based on surveys of labour costs published by the Swedish Employers' Confederation. These contain time series of wages for time worked, social charges and total labour costs in manufacturing for most OECD countries and convert them into a common currency. Although no allowance is made for the different purchasing power of the wages paid (‘PPPs’) the comparison is useful since the products of the industries of various countries compete on international markets on the basis of current exchange rates.
The Growth of Output and Productivity in the UK: the 1980s as a Phase of the Post-War Period
Authors: Feinstein Charles , Matthews Robin
Published: March 2007

The completion of Mrs Thatcher's first ten years as Prime Minister stimulated many surveys of the economic policy of the government during that time in office (for instance Layard and Nickell 1989; Bean and Symons 1989). Authors writing at that time were concerned particularly to make comparisons with the performance of the predominantly Labour governments that had been in power during the previous economic cycle, running from 1973 to 1979.
Comparative Properties of Models of the UK Economy
Authors: Fisher P.G. , Turner D.S. , Wallis K.F. , Whitley J.D.
Published: March 2007

The nature of the association between inflation and the level of unemployment has been a persistent issue of controversy over the last three decades. Initially, attention focussed on the statistical relationship between nominal wage inflation and unemployment— the Phillips curve—which could be seen equally as a relationship between price inflation and unemployment, if prices are a constant mark-up on wages. This was quickly adopted as a menu for policy choice, describing the trade-off between increases in unemployment and reductions in inflation. By the 1970s, however, the question was whether a long-run trade-off existed at all, the OECD economies having experienced rising unemployment and, simultaneously, rising inflation. The subsequent re-examination of labour market behaviour introduced the concept of an equilibrium rate (the natural rate) of unemployment which, in the monetarist view, was not amenable to demand management policies. More recent developments reflect a growing concern with the supply side of the economy, including the question of what determines the non accelerating inflation rate of unemployment (NAIRU).
The External Implications of Closer European Integration
Authors: Mayes David G.
Published: March 2007

The happy outcome which is looked for in closer economic integration in the world is that all countries gain. This is particularly clear for a general removal of trade barriers, such as those indicated for the whole range of products by Stoeckel et al. (1990) or for individual products, such as the ending of the Multifibre Arrangement explored by Trela and Whalley (1990). Here those who have been protecting their industries gain because the losses to producers are more than offset by the gains to consumers, those who have been discriminated against in the past gain because they can increase their exports and those foreign countries which were previously benefiting from privileged access to the protected markets gain because their loss of market share is more than offset by an expansion in the market.
The Effects of the Single Market on the Pattern of Japanese Investment
Authors: Yannopoulos George N.
Published: March 2007

The completion of the European Community's internal market will be achieved through the removal of a host of non-tariff barriers to trade and the mobility of factors of production and the liberalisation of the conditions for the provision of service activities inside the single market. This completion of the European Community's internal market will enhance the locational advantages of European markets.
Data Adjustment and Forecast Performance
Authors: Blake Andy , Pain Nigel
Published: March 2007

This article demonstrates how the use of balanced data can affect a forecasting exercise. The forecast published by the National Institute in November 1989 is revised with the constant and current price residual errors in the National Accounts being assigned to component parts in a manner consistent with the overall pattern of imbalances within the accounts at the time. One of the main results is that preliminary estimates for some components of the accounts, available at the time of the forecast, may also need to be adjusted. This is required to ensure that the forecast is consistent with both balanced data over the future and the structure of the model itself.
European Integration and External Constraints On Social Policy: Is a Social Charter Necessary?
Authors: Ermisch John
Published: March 2007

This article examines the conditions under which social policy would be constrained by European economic integration and assesses whether a Social Charter is needed. It provides a framework for interpreting the ‘principle of subsidiarity’, examines the potential for a direct effect of social benefits on the movement of people within the EC, investigates the impact of the taxes used to finance social policy on the location of businesses and people and the incidence of these taxes. As the degree of labour mobility in response to differences in real wages between EC countries is demonstrated to be crucial in deciding whether a Social Charter is necessary, a substantial part of the paper examines the evidence on the responsiveness of labour mobility, and it suggests little need for a Social Charter.
Chapter II. The World Economy
Authors: Gurney Andrew , Barrell Ray
Published: March 2007

In the course of the last 2 years economic performance in the major 7 economies has become less synchronised. In 1988 GNP grew by more than 3.5 per cent in all seven economies, with growth rates either at or close to cyclical highs. However for 1991 we expect negative GNP growth for Canada and the United Kingdom, negligible growth in the United States, growth of around 1.5 per cent in France and Italy, and of over 3 per cent in Germany and Japan. Table 1 shows that GNP growth in the major 7 economies is expected to slow to 1.2 per cent in 1991. Chart 1 highlights the different responses among the major 4 economies.
Feers and the Path to EMU
Authors: Barrell Ray , In't Veld J.W.
Published: March 2007

The concept of the Fundamental Equilibrium Exchange Rate (FEER) was first used in Williamson (1983) to calculate the misalignments of the exchange rates for major currencies, and as a basis for his target zone proposal. In this note we use the same concept in a different context, that of the relations amongst the European economies which are members of the ERM, a system which is evolving towards monetary union. The first section reviews the concept of the FEER and its use in policy analysis. The second section relates this to the analysis of real exchange rates and external balance within a potential monetary union. The third section includes new estimates of FEERs using the most recent version of our world model, and considers the possible future evolution of FEERs in the context of EMU, including some tests of the sensitivity of these estimates to parametric change.
Comparative Properties of Models of the Uk Economy∗
Authors: Church K.B. , Mitchell P.R. , Turner D.S. , Wallis K.F. , Whitley J.D.
Published: March 2007

This article describes the current versions of six leading macroeconometric models, focusing on their treatment of several current policy issues, namely the role of the housing market, the implications of ERM membership and, more generally, the relative effectiveness of fiscal and monetary policy. Differences in the modelling of the housing sector and the exchange rate are important in explaining differences in overall model properties which are revealed in standard policy simulations. Monetary policy is more potent than in previous versions of the models, which has important implications for the conduct of macroeconomic policy under ERM membership.
Innovation and Productivity in Eastern Europe: An International Comparison
Authors: Ray George F.
Published: March 2007

The aim of the study was to approach an assessment of the technological level of the economies in Eastern Europe, particularly in the newly-democratising countries—Bulgaria, Czechoslovakia, Hungary and Poland—by means of studying their innovative activity and productivity levels in comparison with the West.
The Soviet Economic Crisis
Authors: Nove Alec
Published: March 2007

The article examines the weaknesses and inefficiencies of the Soviet centralised planning system, and the means by which Gorbachev and his colleagues sought to reform it. Along with the objective difficulties in the way of ‘marketisation’ (lack of practical experience and market infrastructure, lack of agreement about the final objective of reform, obstruction by vested interests, ideological pre-conceptions, popular distrust), grave policy errors were committed (unbalanced budget, inflation ary money-creation, loss of control over incomes, reluctance to increase prices). Meanwhile the rise of natioralism, and the de-legitimation of the regime and of the Party, created a power-vacuum, which by 1991 made impossible the implementation of any policy. Disruption of inter-republican and inter-regional supply links, and drastic cuts in imports, are causing serious declines in production. The failed coup accelerated the process of disintegration.
The UK Economy
Authors: Young Garry
Published: March 2007

The UK and world economies have reached a position where it is not clear whether they are going to continue expanding at a reasonable trend like rate or whether the slowdown from above trend growth in 1995 is about to intensify into a recession in 1996.
Foreign Direct Investment in Central Europe Since 1990: An Econometric Study
Authors: Lansbury Melanie , Pain Nigel , Smidkova Katerina
Published: March 2007

It is widely recognised that foreign direct investment (FDI) may have an important role to play in the transformation of the formerly centrally planned economies of Central and Eastern Europe. FDI provides a vital source of investment for modernising the industrial structure of these countries and for improving the quality and reliability of infrastructure. In addition new investments may also bring badly needed skills and technologies into the host economy. Evidence from joint ventures in Hungary (Lane, 1994) shows that such firms had a higher propensity to trade and invest than purely indigenous firms. Total FDI inflows into Hungary between 1991–93 were equivalent to 25 per cent of total fixed domestic capital formation (UINDTCI, 1995).
The World Economy
Authors: Barrell Ray , Morgan Julian , Pain Nigel
Published: March 2007

It is now quite clear that growth slowed in Europe around the end of 1995, and that it remained low in the first quarter of 1996. However, the most recent information suggests that the slowdown is likely to prove temporary. Early indicators for the second quarter suggest that growth has begun to accelerate, much in line with our forecast published in May. We have made no further adjustment to our forecast for EU wide growth this year, with output still expected to rise by around 1½ per cent this year and around 2¾–3 per cent next year. Recent exchange rate developments should help support demand, as the D-mark, the French franc and other currencies within the D-mark bloc have all depreciated against the dollar in the last few months. A number of economies in Europe appear to have some spare capacity, and can increase output, whilst the US is operating at or above capacity, and a reduction in demand should ease incipient inflationary pressures rather more than it reduces output. The depreciation of the D-mark has been associated with a loosening of monetary policy, with short-term interest rates in Germany being a full point lower than they were a year ago. French short-term interest rates have fallen much more, reflecting the disappearance of a significant risk premium last year. The loosening of policy was timely, and should help offset the deflationary pressures that have come from a slowdown in stock accumulation in both France and Germany and from low investment, especially in Germany.
Recession and Recovery in the United Kingdom in the 1990s: Identifying the Shocks
Authors: Catão Luis , Ramaswamy Ramana
Published: March 2007

This article uses a vector autoregression (VAR) approach to identify the causes of the 1990-92 recession in the UK. The VAR approach is shown to be particularly pertinent for quantifying the relative magnitude of the different demand shocks, and in decomposing them into monetary and expectational factors. The main finding is that the recent recession was precipitated primarily by shocks to consumption, and that the prior monetary tightening and the subsequent collapse in the housing market explain just part of this contraction. Non-monetary shocks also appear to have played an important role in bringing about the recession. The VAR model also offers interesting insights on the nature of the recovery that is currently under way.
The UK Economy
Authors: Sheldon Marie , Young Garry
Published: March 2007

Since our last forecast, the level of sterling and its future prospects have changed dramatically, with the effective rate rising by around 10 per cent. Early signs of a shift in sentiment towards sterling could be seen in the Autumn, with the rate against the D-Mark rising from 2.31 at the end of August to 2.46 at the end of October with smaller increases against the other currencies. At that time it was not clear whether the rise would be sustained. Now, towards the end of January, sterling stands at 2.70 against the D-Mark and 1.66 against the dollar, respectively 17 per cent and 6½ per cent higher than at the end of August.
The Impact of Foreign Direct Investment on Sectoral Adjustment in the Irish Economy
Authors: Ruane Frances , Görg Holger
Published: March 2007

Foreign direct investment (FDI) has played a crucial role in the overall development of the Irish economy over the past three decades, as the Republic of Ireland, hereafter referred to as Ireland, has pursued an industrial strategy characterised by (i) promoting export-led-growth in Irish manufacturing through various financial supports and fiscal incentives, and (ii) encouraging foreign companies to establish manufacturing plants in Ireland, producing specifically for export markets. The significance of FDI for the Irish economy is now reflected in, inter alia, the significant gap between GNP and GDP; in 1994, GNP was roughly 88 per cent of GDP in Ireland. As regards the manufacturing sector, the high shares of output and employment in foreign-owned companies in Ireland also indicate the importance of foreign firms. As we discuss in some detail in Section 3, foreign companies produced roughly 69 per cent of total net output and accounted for 45 per cent of employment in Irish manufacturing industries in 1993.
The UK Economy
Authors: Riley Rebecca , Young Garry
Published: March 2007

The performance of the UK economy in recent months has continued to be enviable. Inflation is almost exactly equal to the government's target. Economic growth has slowed down to what appears to be a sustainable rate of about ½ per cent per quarter. Unemployment is falling, but at a slower rate than last year. Most spectacularly, government borrowing has fallen to within a billion pounds of a balanced budget.
Section II. Prospects for North America and Japan
Authors: Pain Nigel
Published: March 2007

The present economic expansion in the United States continues to appear firmly based. GDP rose by 0.9 per cent in the final quarter of last year, giving calendar year growth of 3.8 per cent, the best outturn since 1988. Industrial production rose by 5¾ per cent in 1997, helped by the rapid expansion of cross-border trade in North America. Recent developments in Asia are likely to have an important bearing on economic prospects this year, with signs that weaker external demand has begun to affect the tradable goods sector and offset some of the remaining cyclical strength in domestic demand. The present strength of the dollar along with the decline in energy prices is continuing to help to balance the cost pressures emerging from the domestic labour market and bring a further temporary decline in price inflation. Overall, we continue to expect growth to slow to between 2½–2¾ per cent this year, with inflation declining to 1½ per cent.
The UK economy
Authors: Young Garry
Published: March 2007

Two of the most significant policy changes made by the government since coming to office are the transfer to the Bank of England of the power to set interest rates and the announcement of large increases in public spending following its Comprehensive Spending Review (CSR). The unexpectedly fast growth in future public spending is bound to have an immediate and important bearing on the setting of interest rates. As such, the development of the economy over the coming years will be affected by the interaction of these two separate policy changes.
The world economy
Authors: Pain Nigel
Published: March 2007

Developments in the Asian economies have clearly begun to be felt in the wider global economy in recent months. It has always been expected that the OECD economies would be affected by the aftermath of the capital market turmoil last year, although the timing and magnitude of the impact was difficult to predict. Domestic demand in the affected Asian economies has proved much weaker than expected, with the effects magnified by a continued downturn in Japan. GDP fell by 5¾ per cent in Korea in the first quarter of this year and by 1¼ per cent in Japan. The aggregate volume of merchandise imports in Asia is expected to decline by around 5½ per cent this year, with falls of up to 25 per cent in countries such as Korea, Thailand and Indonesia. This largely accounts for our projected decline in world trade growth to under 6 per cent this year from an estimated 9¾ per cent in 1997.
Section III. Prospects for Europe
Authors: Morgan Julian , Hubert Florence , Holland Dawn , te Velde Dirk , Genre Véronique
Published: March 2007

Activity picked up markedly in the EU area last year; growth was estimated to have been 2.6 per cent compared with 1.8 per cent recorded in 1996. However the aggregate movement masks some significant divergences in economic performance. Growth was relatively modest, at between 2–2½ per cent in Germany, France and Austria, whilst Italy and Sweden recorded growth rates below 2 per cent for the second year running. The fastest growth was achieved in the Irish Republic where output expanded by over 10 per cent last year, following cumulative growth of 27 per cent in the previous three years. Finland also recorded rapid growth of nearly 6 per cent and nearly all the remaining EU countries enjoyed growth rates of 3 per cent or above. Outside the EU, activity remained robust in Norway, Poland and Hungary but was markedly weaker in the Czech Republic and Switzerland. Indeed real GDP has barely changed in Switzerland since 1990, partly reflecting the strength of the Swiss franc, although there are now signs that growth will be stronger in 1998 as the franc has depreciated since the end of 1995.
Raising schooling attainments by grouping pupils within each class
Authors: Prais S.J.
Published: March 2007

With a view to raising the attainments of pupils at the early stages of their schooling, detailed recommendations (‘strategies’) for teaching numeracy and literacy have been issued by the Department of Education and Employment. Among the important recommendations (clearly stated in the Preliminary Report of the National Numeracy Task Force) are that, in the central and greater part of each lesson, the children in a class are to be divided into a number of sub-groups according to their ability. Some reliance for the success of this recommendation has been placed in official circles on a Canadian research study (a ‘meta-analysis’) summarising a great many earlier studies; the present article argues that the Canadian study was seriously flawed, that in reality such grouping of children within a class is often likely to be to the detriment especially of low-attainers (for example, summer-born boys), to lead to an increased disparity of attainments within the class, to a more difficult task for the teacher, and to a lower rate of progress by the class as a whole.
The implications of the Boskin Report
Authors: Oulton Nicholas
Published: March 2007

The Boskin Commission has claimed that the US Consumer Price Index (CPI) is currently overestimating the true rate of inflation by 1.1 percentage points per annum. This article assesses the evidence for this conclusion and its implications for the measurement of past and future US economic performance. If Boskin is right, US GDP growth in the period 1970 to 1996 has been underestimated by about 0.9 per cent per annum. Some at least of the methodological changes recommended by Boskin will probably be adopted. As a result US GDP growth will appear to rise, eventually by as much as 0.5 per cent per annum, even though no genuine improvement in economic performance has actually occurred. Boskin has implications for the UK too. Recent evidence suggests that use of a formula recommended by Boskin for averaging price quotes together can by itself reduce UK inflation by 0.4 per cent per annum.
Labour costs and employment policy
Authors: Hart Robert A. , Ruffell Robin J.
Published: March 2007

Under the Government's New Deal proposals to help create jobs for the young unemployed, employers are offered marginal employment subsidies. Such interventions involve relative changes in the firm's fixed and variable labour costs. In turn, cost changes have implications for both employment and hours of work. This study examines possible strengths and weaknesses of employment policies that are designed to price young unemployed into jobs by reducing related labour costs. It focuses on one such intervention, the major restructuring of employers' National Insurance Contributions (NICs) in the 1985 Budget. This is then linked to the New Deal measures.
The world economy
Authors: Pain Nigel
Published: March 2007

The economic outlook for the global economy has deteriorated appreciably over the past six months. By the late spring it had already become clear that growth in the OECD economies would slow to around 2½ per cent this year from 3 per cent in 1997, with strong domestic demand outside Japan being offset by the growing impact of the contraction in the Asian economies. However the further slowdown projected in 1999 appeared relatively benign, with monetary conditions remaining accommodative in the major economies and commodity prices remaining weak.
The Working Families Tax Credit
Authors: Meadows Pamela
Published: March 2007

Gordon Brown's first Budget as Chancellor signalled a new emphasis on microeconomic relationships in economic policymaking. Whereas in the past there has been implicit acknowledgement that macroeconomic policy relies on appropriate responses in individual behaviour, this time the policy focus was explicitly on the structure of the incentives facing employers and employees.
The dollar, trade, technology and inequality in the USA
Authors: Anderton Bob , Brenton Paul
Published: March 2007

The US experienced a considerable increase in inequality between skilled and less-skilled workers during the early 1980s—a period which corresponds with a large temporary appreciation of the dollar. This article investigates the reasons behind this rise in inequality by evaluating the impact of trade with low-wage countries (LWCs) and technological change on the wage bill share of skilled workers (which is designed to capture movements in inequality arising from changes in both the relative wage and employment opportunities of the less-skilled). We find that an increase in US imports from LWCs—encouraged by the large appreciation of the dollar in the early 1980s—seems to explain some of the rise in US inequality in low-skill-intensive sectors, but that technological change (proxied by R&D expenditure) explains the rise in inequality in high-skill-intensive sectors. However, given that the timing of the sudden rise in US R&D expenditure corresponds with the appreciation of the dollar, it may be the case that the deterioration in US trade competitiveness during this period contributed to the rapid increase in the rate of technological change via mechanisms such as ‘defensive innovation’. Hence one might also argue that the technology-based explanation for the rise in US inequality could actually be a trade-based explanation.
Pension finance in a calibrated model of saving and income distribution for the UK
Authors: Sefton James , Dutta Jayasri , Weale Martin
Published: March 2007

Traditional macroeconomic models are based on the concept of a single representative consumer. A great deal can be gained by constructing a dynamic general equilibrium economic model which represents the behaviour of a panel of consumers spread out along the income distribution. Such a framework allows us to assess the distributional impact of policy changes. We present here such a model, showing the behaviour of consumers facing uncertain incomes and we use it to assess the distributional impact of changes to pension provision. We find that means testing of old age pensions increases inequality among the retired because of the effect it has on incentives to save.
Section II. Prospects for North America and Japan
Authors: Pain Nigel
Published: March 2007

Recent economic data indicate that the momentum of the present cyclical expansion in the United States continues to be stronger than widely expected at the beginning of last year. GDP is provisionally estimated to have risen by around 3¾ per cent in 1998, with domestic demand rising by 5 per cent. The last three years have all now seen output growth of 3½-4 per cent with high resource utilisation but low, and declining, price inflation.
Section III. Prospects for the Euro Area
Authors: Barrell Ray , Pain Nigel , Hubert Florence , te Velde Dirk , Holland Dawn , Genre Véronique
Published: March 2007

In this section we initially discuss developments in Europe as a whole, and present a forecast for the Euro Area for the first time in Table 10. With inflation subdued in the Euro Area, there is a case for potential further reductions in interest rates in the short term, and we investigate the potential effects from such a monetary relaxation in Box A. This allows us to say something about potential asymmetric national reactions to a given monetary policy change, and also about the effects of faster growth on fiscal positions. There had been fears that the birth of the Euro would be accompanied by some loosening of the fiscal stance, but there does not appear to be much risk of this at present. We also discuss fiscal prospects in the EU, and highlight key developments in each country.
Flexibility, quality and competitiveness
Authors: Casey Bernard , Keep Ewart , Mayhew Ken
Published: March 2007

Flexibility, quality and competitiveness are all hallelujah words in current debate about national economic performance. The achievement of more flexibility or higher quality or greater competitiveness, it is said, will help the UK become a more successful economy. At the same time increased labour market flexibility and deregulation has been seen by UK governments since the early 1980s as a means of creating jobs and tackling unemployment. In following this line the UK government has looked to the North American example, and has suggested on numerous occasions that overregulation and inflexibility in most European countries' labour markets has worsened unemployment. While the record of enhanced labour market flexibility in boosting employment is not the focus of this article (for details of the debate, see Solow, 1998; Walwei, 1998), this job creation aspect of flexibility is important because it has coloured discussions of flexible forms of employment in the UK and has often led to our conflating flexibility with deregulation. As will be argued below, the evidence from Europe in fact suggests that the use of some forms of flexible employment are not incompatible with relatively high degrees of labour market regulation.

“I do not know what the word ‘flexibility’ is. Rarely in international discourse has a word gone so directly from obscurity to meaninglessness without any intervening period of coherence. Some people when they talk about labour market flexibility are talking about the freedom of employers to fire workers, the freedom of employers to reduce wages. I tell you something. That kind of freedom is not going to lead to higher standards of living in any of our countries.” Robert Reich, speaking at the International Labour Organisation, 10 June, 1994.
Fiscal report
Authors: Young Garry
Published: March 2007

The public sector finances have been transformed in recent years as tight expenditure control has been combined with buoyant revenue. In the last fiscal year, the overall budget was in surplus by almost £6 billion. Official estimates indicate that the current balance was in surplus by £10 billion, thus comfortably meeting the Golden Rule.(1)