This article outlines some of the intellectual lessons learnt by central bankers during the financial crisis. The key question is whether a broader range of policy options than simple inflation targeting has to be considered in order to limit instability. Interactions with overseas pools of savings, government debt markets and financial risk have all conspired to complicate significantly the task of monetary policymaking. These developments do not mean that the target for inflation has to be modified or dropped but that setting policy will be a more complex task and require more explanation than it has in the recent past.

In an era of free movement UK employers have had ready access to a supply of labour from the European Union to fill low-skilled jobs. This has enabled them to adopt business models, operating within broader supply chains, that take advantage of this source of labour and the flexibility that many migrant workers – especially those who are new arrivals to the UK – are prepared to offer them. Drawing mainly on evidence from employers on the role of migrant workers in selected sectors with a substantial proportion of low-skilled jobs, this article explores the challenges and opportunities they face in transitioning to a new post-Brexit immigration regime.

Producing inside the European Community offers various advantages to Japanese firms, many of them related to costs. In manufacturing, for example, it enables them to avoid paying tariffs, to avoid quantitative restrictions, to reduce shipping costs and to obtain better market access. To make the exploitation of those cost advantages worthwhile the production cost differences between a Japanese company's plant in Japan and a plant in Europe should not exceed the advantages to be reaped. It is thus reasonable to expect that while a Japanese transplant in Europe may not be able to achieve parity with cost and productivity levels in its parent it can nevertheless outperform many UK plants in the same industry if the parent was a competitive exporter. Some of the better performance will come from purely technical factors such as more advanced and higher quality products, more efficient production processes and access to higher quality components, all of which can be brought in from outside Europe. However, even after taking account of those ‘technical’ factors efficiency differences remain, largely related to the quality and utilisation of the labourforce.

At the time of the fall of the Berlin Wall, employees in East Germany were at least as well educated as employees in West Germany in terms of formal educational qualifications. However, it is unclear to what extent the skills and knowledge acquired through the East German education system, and through employment in a socialist labour market, are transferable to the new market-based economy. This study aims to shed light on this issue by giving a comprehensive description of the work of those employees who remained employed after the first phase of restructuring (i.e. in 1991) in East Germany, and comparing it with work in West Germany. Overall, the similarity between workplaces in East and West Germany soon after reunicication is striking. In addition, the patterns of task changes between 1991 and 1999 were very similar in both parts of Germany. Neither the level of task inputs in1991 nor the changes in task inputs between 1991 and 1999 were driven by cohort effects, a surprising finding given how differently the age groups were affected by the historical event. The Largest difference between the east and the west exists in terms of workplace computerisation. Although East Germany has caught up rapidly, it was still lagging behind the west in terms of computer use in 1999.

Most discussion of the Government's fiscal position seems to focus on the immediate risks associated with a rising national debt. There is concern that the UK's credit rating will be reduced and fear that this might lead to a further fall of the exchange rate. It is sometimes suggested that if the budget deficit is not reduced sharply in the reasonably near term there will be a significant risk that the UK might default on its debt.

There are signs that the UK labour market has behaved differently in the most recent economic recovery. After the end of the recession in 1992 unemployment began to fall much earlier than expected, whilst wage and price inflation remained very low. Chart 1 plots unemployment and real wages in the first three years of the last two recoveries. In both cases unemployment rose in the first year of the recovery but thereafter the performance in the 1990s is much better. In the second year, unemployment began to fall significantly, much earlier than it had in the 1980s recovery. Three years after the low point in output the rate of unemployment was around 8½ per cent, 2½ per cent below the level pertaining at the equivalent point in the last cycle. At the same time real wages have shown little growth benefits compared with 4 per cent growth in the 1980s recovery.

September brought the United Kingdom its first mass market bank run. Although there had been bank runs in the nineteenth century, with the last in 1866, very few people then had bank accounts so the runs were not in any sense comparable with what happened to Northern Rock, which showed a failure of mass retail banking.

Official statistics suggest that over the last two decades the commercial service sector has grown rapidly both in absolute terms and relative to the rest of the British economy. Given the importance of service activities, and the fact that many of them are notoriously difficult to quantify, it is desirable that the reliability of service output measures be subject to scrutiny and, where possible, improvement. Accordingly this article presents some alternative output measures which have been compiled for financial, recreational and catering services, and compares the picture which emerges, for the economy as a whole and for individual service industries, with, that portrayed by official data.

While the need for a greater volume of vocational training is widely recognised, it is unlikely to be achieved entirely by labour-market forces. This article, drawing on an investigation of British and German firms with skill shortages, considers the ways in which government can promote transferable training. Attention is given to coverage, likely costs, and the scope for sharing those costs with the private sector. Programmes already operating in the UK are identified and assessed, and some future approaches suggested.

It is a great honour to be invited to deliver this lecture to mark the National Institute's Jubilee. The Treasury and the National institute have been neighbours since the Institute moved to Westminster during the war. We have benefited from the exchange of staff and ideas, and I am delighted that the present Director is a former colleague from the Treasury.

Robert Hall, whose Memorial Service took place earlier today, was one of those great men. He made a notable contribution to government over many years and followed that by equally distinguished guidance to the National Institute after he retired.

In 1980 the unemployment rate (on standardised OECD definitions) for under-25 year-olds was 14 per cent in the United Kingdom, 15 per cent in France and 4 per cent in Germany. This year it is expected by OECD that these rates will be 21 per cent in this country, 31 per cent in France and 9 per cent in Germany. In all three countries special measures have been introduced in an attempt to reverse the trend. In this note we outline the circumstances in which this rapid increase in youth unemployment has occurred and then describe the measures taken in each country to combat it.

The comparison of events in Britain with the experience of other major industrial countries can make an important contribution to debate about policy alternatives. Within Western Europe such comparisons are especially apt since a number of countries of similar size, at broadly the same level of economic development, face many of the same problems and opportunities. The main purpose of the study reported here is to draw lessons for Britain from the experience of France, and to see to what extent the lessons one might be tempted to draw are the right ones bearing in mind the differences between the two countries as well as their similarities.

This paper illustrates how learning can be incorporated into an existing forward-looking macroeconomic model as an alternative to the more conventional but arguably more extreme assumption of model consistent or rational expectations. The key characteristic of the model consistent learning approach to be adopted here is that agents are assumed to know the true structure of the model but that they need to learn about some parameters of that system, for example those defining the government's policy decision rule. Importantly, models solved under this assumption retain the property that the current behaviour of economic agents can be influenced by the expected future effects of policy changes. This type of learning may be contrasted with one where economic agents may also be uncertain about some structural parameters of the true model but in addition, they do not possess sufficient information to form future expectations consistent with their estimated model. As a consequence, expectations are formed using backward-looking reduced form equations with parameters which agents continuously learn about. This approach, known as boundedly rational learning, has been adopted in Hall and Garratt (1992) who apply these techniques to a full-scale non-linear macroeconometric model.

The large increase in unemployment in the last two years and the very different patterns of regional unemployment growth as compared to the last recession have brought about renewed interest in the distribution of unemployment. In the last two years the variation in regional unemployment rates has diminished significantly such that by August of this year all regions in Great Britain had an unemployment rate somewhere between the 11.4 per cent in the North and the 7.8 per cent in East Anglia. Ignoring these two outliers, the remaining eight regions in Great Britain all had unemployment rates between 8.9 and 10.8 percent.

It is generally accepted that the performance of the British economy in the last fifteen years has been relatively poor, as measured by the criteria normally used for assessing economic success or failure. This proposition has been widely documented, and it is not the purpose of this article to review the evidence at length. The attempts to accelerate the British growth rate failed. The objective in the early sixties was the modest one of getting the figure up from about 3 per cent a year to about 4 per cent a year. In the event, the rise in real national product from 1960 to 1973 stayed at 2.9 per cent a year. Britain's share in world trade in manufactured goods fell in every year from 1960 to 1973, with only one exception (1971). At the beginning of the period, Britain's share in this trade stood at 162 per cent; by 1973, the figure was down to 9 1/2 per cent. These failures in economic growth and in foreign trade do not appear to have had much compensation elsewhere. Consumer prices rose, if anything, rather faster than the average for other industrial countries; and Britain's record on unemployment was no better than average.

The term national product is used in this note, for convenience, as shorthand for gross domestic product at constant factor cost. Where the word ‘output’ is used, it refers to the estimate of the national product from output data.

The debate on European monetary union has brought the issue of European fiscal policy into public scrutiny. This note discusses the problems of fiscal policy coordination in Europe over the next decade, and analyses the evolution of debt and deficits over the 1970s and 1980s. We then look more formally at the concept of a sustainable path for public debt and report on some tests that investigate whether or not debt paths in Europe have been on a stable trajectory. The note by Barrell and In't Veld in this Review considers the importance of fiscal solvency in constructing large scale macro models, and casts further light on the issues discussed here.