The British economy has performed well since the recession of the early 1990s. How much of this is due to the revolution in information and communications technology (ICT)? We find that the stock of computing equipment has grown at a similar rate to that seen in the US, but there appears to have been no similar ICT-induced pick-up in productivity growth. We suggest that any underlying improvement in productivity growth has been obscured by a slowdown in manufacturing and by the need for the unemployed to be absorbed into employment. We find no evidence yet of any clear effect of ICT on pricing and suggest that any benefit of greater competition is likely to come about by encouraging productivity growth rather than by reducing margins. We argue that the main cause of Britain's improved performance lies in the labour market. Looking forward, we are optimistic that the benefits of ICT will become more apparent as the factors that have obscured it become less important.

Policymakers need to know if the structure of competition and the degree of banking market concentration change the incidence of financial crises. Previous studies have not always come to clear conclusions. We use a new dataset of 19 countries where we include capital adequacy and house price growth as factors affecting crisis incidence, and we find a positive role for bank concentration in reducing incidence. In addition, we look at New Industrial Economics indicators of market structure and find that increased market power also reduces crisis incidence. We conclude that attempts to increase competition in banking, although welcome for welfare reasons, should be accompanied by increases in capital standards.

We modify NiGEM in order to study the macroeconomic effects of imposing import tariffs in the US under different assumptions regarding the long-run price setting behaviour of exporters. Overall, the macroeconomic implications in the US resemble the impact of a cost shock or adverse supply shock as prices increase while output declines. Due to exchange rate movements and changes in the prices of traded goods, prices and output in other economies tend to move in the same direction. We demonstrate that the size and persistence of the macroeconomic impact following the introduction of new tariffs critically hinge upon the specific assumptions underlying the behaviour of export prices. If foreign exporters are concerned about their net-of-tariff prices, there will be little adjustment after the initial surge in tariff-inclusive export prices. As a result, the adverse macroeconomic impact will be large and persistent both in the US and abroad. While additional government spending financed by tariff revenues could mitigate the adverse impact on the protectionist economy in the short run, retaliation by its trading partners would worsen the outcome. Our simulations also raise doubts about the ability of protectionist measures to rein in global imbalances.

The housing market plays a fundamental role in the economy, and its functioning affects both consumer welfare and economic stability, as the recent crisis has made clear. Research by Barrell et al. (2010) shows that house prices are a key determinant of financial crisis probabilities in OECD economies, and contribute significantly towards systemic banking risk. This must lead the regulator to assess carefully the role of the housing market in this relationship, and if necessary impose regulatory restrictions on the market so as to ensure it functions in a way that reflects the best interests of the economy. In this note we look at the evolution of real house prices in the UK, noting that they have a strong cyclical pattern. We then look at the factors that might affect the evolution of real house prices, and we estimate a dynamic equation describing those prices. After considering a wide set of factors, we demonstrate that there is little role for the supply of housing relative to the number of households. This may be because the ratio of these two variables has been relatively constant over the past thirty years. We show that real borrowing costs, real incomes and the loan-to-income ratio are significant factors determining the long-run path of real house prices, and that front loading problems from high short-term nominal interest rates affect the path of adjustment. Overvaluations can persist for years, and we would judge that real house prices are currently fundamentally overvalued by around 10 per cent. If loan-to-income ratios are reduced then the fundamental overvaluation will increase, and such a policy will put further downward pressure on real house prices.

The UK is restructuring the fiscal policy framework once again, with an intention to move toward independent assessment and forecasting in the budget process. At the same time a large-scale, if delayed, fiscal consolidation is planned at a time when there is significant spare capacity in the economy. Economic growth is also projected to be below trend, at least this year and perhaps next. It is unusual to see a fiscal tightening when the output gap appears to be widening. These policy settings should be seen in the context of the most radical change in the nature of the relationship between the government and the economy for at least thirty years. This note assesses the impact of the new programme on the economy as well as setting out a projection for the medium-term public finances.

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.

The purpose of this note is to discuss the role of forward-looking behaviour in wage formation in the major economies, and to analyse the implications for policy analysis using the National Institute Global Econometric Model, NIGEM. Our policy analyses are directed at issues relating to the ERM. The first section of the note discusses nominal inertia and staggered contracts (see Taylor, 1980), whilst the second discusses bargaining and wage formation, using the analysis discussed in Layard, Nickell and Jackman (1991). The third section discusses some empirical work on wages undertaken at the Institute, whilst the fourth section analyses the implications of forward-looking wages for our model NIGEM. The final section concludes.

The high unemployment of the last 15 years has brought with it a proliferation of special employment measures (SEMs). These measures all involve intervention in the labour market with varied aims and means but with a common theme namely the reduction of the claimant count of unemployment. Initially introduced as a short-term response to what was hoped to be a transient problem, the use of SEMs has now become permanent. The gradual movement from transience to permanence has coloured much of the development of these schemes and understanding it gives a clearer insight into the objectives and underlying theoretical perspective of SEMs. For although SEMs may appear as a continuum there have been a number of changes of direction in their development.

Economic convergence within the EMS member states is a precondition for further moves to economic and monetary integration. The Delors Report has set out a path toward EMU in three stages, where transition to the next stage depends on some degree of convergence being achieved in the previous stage. In October 1990, the European Council in Rome agreed that ‘in order to move on to the second phase (of economic and monetary union), further satisfactory and lasting progress toward real and monetary convergence will have to be achieved’ (Press communique, European Council, Rome, 28 October 1990). The draft treaty text for the Maastricht summit states that before the start of the second phase in January 1994, the council shall assess the progress made with regard to economic and monetary convergence, and in particular with regard to price stability and balanced public finances.

This article compares how vocational guidance is provided in schools in Britain and three Continental European countries. The comparisons are based on classroom observations and interviews with teachers in some two dozen secondary schools in Germany, Switzerland, the Netherlands, together with a similar number in Britain. Careers guidance on the Continent begins earlier, is taught by careers specialists in separate lessons devoted to the topic, and is geared specifically to providing youngsters with detailed information on the content and requirements for particular types of work. The lack of focus on occupationally-specific information in ‘careers guidance’ in British schools, particularly in the now-widespread ‘Personal and Social Education’ (PSE) courses, leaves many British youngsters at a distinct disadvantage in making a successful transition to the world of work. The article suggests a number of relatively simple measures which could significantly improve careers education in British schools.

This paper surveys the recent academic literature on the economics of cross-border regulatory cooperation as well as recent policy developments in this area. While institutional arrangements of cross-border regulatory cooperation used to focus on day-to-day supervisory tasks, the crisis has given an impetus to a focus on cooperation at the bank resolution stage, with an array of different cooperation forms. A growing theoretical literature has documented different externalities arising from national supervision of cross-border banks, while empirical evidence has been relatively scarce. The paper concludes with a forward looking agenda both for policy reform and academic research in this area.

An investigation of the pricing policies of British exporters is of particular interest at the present time when devaluation has been used as a means of enabling them to improve their competitiveness. Although pricing policies have received some attention in recent research into the response of exports to changes in domestic demand pressure,(1) and the relative profitability of home and export sale,(2) no specific examination of pricing policies has been published since the current period of international monetary uncertainties began in 191.(3)

Better pre-planning of work is a familiar requirement for improved productive efficiency; this has manifested itself for some decades in a tendency for an increasing proportion of the workforce to be transferred from physical production on the factory floor to ‘paper work’ in offices—that is, to administrative and clerical activities. That tendency has been offset, especially in the past decade, by advances in data processing machinery allowing clerical activities to be performed very much more quickly and by fewer staff. The total number of employees required for administrative and clerical tasks has fluctuated according to the relative strength of these tendencies. The required quality, or technical capabilities, of such staff has also fluctuated: for 100 years or more, clerical and office staff were usually required to follow formal procedures on direct instructions from a superior; much work was of a purely routine and repetitive nature. The first phase of automation using mainframe computers and central processing facilities did little to alter this situation, and may even have led to further fragmentation and simplification of tasks.

Three years after the implementation of the Adjustment Programme for Greece, public debt remains at unsustainable levels. Despite recent improvements in meeting deficit targets and the fact that the risk of exit from the Euro Area has subsided, growth is still missing and unemployment has surpassed 25 per cent, causing major social tensions. The paper argues that a critical parameter of such failure was that the Programme grossly underestimated the adverse effects that fiscal correction might have on growth. Fiscal multipliers are found to be significant in the Euro Area so that fiscal cuts had strong and permanent Keynesian effects, rather than a transitive and minor downturn as initially assumed. In light of this, the paper argues that policies should now concentrate on enhancing growth and by relaxing fiscal targets allow the multipliers to raise activity as the only route to safeguard the exit from recession and ensure sustainability of debt.

While the global economic recovery remains fragile, output in most of the major advanced economies has been rising since mid-2009. Employment, however, tends to lag production, and unemployment continued to rise well into 2010 in many countries. The ILO estimates that the level of unemployment remains elevated by 30 million worldwide relative to 2007 (ILO-IMF, 2010). After taking into account global population developments, this points to a rise in the global unemployment rate of about ¾ percentage point. As the advanced economies have been faced with the brunt of the global downturn, unemployment rates have risen far more significantly within the OECD area. The unemployment rate in this region remains 2.9 percentage points higher than at the beginning of 2008.

This article first introduces the concept, the rationale, the causes and the genesis of global value chains from a worldwide perspective in the form of a brief overview. In the second empirical section, a closer look is taken at the intermediate trade integration in the EU. In particular, the employment effects of the intermediate trade connections for each EU member state and for selected sectors are highlighted. In the concluding section, it is explained why global value chains are particularly susceptible to rising protectionism. Moreover, tentative implications of the current coronavirus pandemic are pointed out.

At the heart of the evaluation of the economic costs and benefits of adopting the euro lies the question of whether living standards would be higher outside or inside the Euro Area. It is well established that there is a strong positive relationship between openness to international trade and investment and the performance of the UK economy. European integration is continuing to help raise the openness of the UK economy, as well as stimulating product market competition and making the UK a more attractive location for mobile investments. This provides an additional channel through which potential output in the UK is linked to the degree of integration with the rest of Europe. Adopting a common currency may bring modest further gains to productivity and living standards by stimulating trade as well as competition. Reducing exchange rate volatility may also raise the level of fixed capital investment in the UK, although the direct evidence for this is limited, and stimulate inward investment from outside Europe, but could reduce the level of foreign direct investment between the UK and the Euro Area. However it is far from clear how big the net benefits might be or how soon they might start to appear. If the UK were to enter monetary union at a significantly overvalued real exchange rate the gains might never materialise at all and there could easily be significant net losses.

In 1998 childcare was for the first time put on the political map with the publication of the Green Paper ‘Meeting the Childcare Challenge’ (DfEE, 1998), setting out the first National Childcare Strategy. Since then the childcare landscape has changed beyond recognition with a range of initiatives and considerable funding aimed at improving childcare services. A decade after its introduction, this article considers what the childcare strategy has achieved in relation to early years and what remains to be done to meet its key aim, that is: to provide good quality childcare for all parents who need it and all children who can benefit from it.