Growth in the US appears to be slowing rapidly after an expansion of 4.8 per cent at an annual rate in the third quarter of 2007. As we can see from figure 5, growth dropped to almost zero per cent at an annual rate in the fourth quarter and we expect the rate to be negative in the first quarter of this year. The growth rate will be negative for the first time since the downturn in 2001, which, after data revision, no longer constitutes a technical recession.

The turmoil in East Asia over the last six months has led to major realignments of many currencies in the region, whilst domestic equity and property markets have collapsed. Though each of the directly affected economies had some unique problems, all shared the key factors behind the collapse, an over-rapid growth in domestic investment, declining external competitiveness and inefficient and loosely regulated financial institutions.

The world economic scene has changed little since May. Devaluation of the franc, which had seemed likely for more than a year, is now an accomplished fact. Otherwise the scene remains dominated, as it has been throughout 1969, by the widespread expectation of an upward revaluation of the deutschemark after next month's elections in West Germany and by the struggle in the United States to control inflation by monetary means. A forecast of the immediate future of the deutschemark now calls, however, for political rather than economic judgement. Similarly in France much will depend upon the rigour of deflationary measures to be introduced by the government and upon the reactions which they may evoke from the trades unions and their members. In this issue, therefore, we direct our main attention to prospects in the United States, where it is at least reasonably clear what aims the authorities will be pursuing in coming months.

Uncertainties over the prospects for the oil price mean that the short-term forecast is subject to a wider margin of error than usual. The Iraqi invasion of Kuwait could lead to a reduction of world oil production by at least eight per cent immediately and has already produced a significant rise in oil prices. Our central forecast assumes that in the short term oil prices will stay firmer, but that in the longer run there will be no major change in oil market conditions. We have assumed that oil prices (or more precisely the arithmetic average of Brent and Dubai spot prices) will be around $25 per barrel in the second half of 1990, but that they will fall thereafter. This should leave crude oil prices in the range $20–22 per barrel by the end of 1991. Annex I to the chapter investigates the effects of an oil price rise on the world economy, and looks in particular at the distribution of the effects across the major economies. The conclusion of the Annex is that a 25 per cent rise in oil prices is likely to raise inflation in the major seven economies by only a quarter to a half a per cent in the short run, and to lower output by up to a half per cent.

Good evening. It is a pleasure and an honour to be here at NIESR to give the annual Dow lecture. We are very lucky in the UK to have high-quality independent institutions such as NIESR focusing on the policy landscape, and in my time on the MPC I have always valued their commentary and research.

The UK economy faces more than usually uncertain times. Outside the European Union, and in an increasingly challenging global environment characterised by ageing populations, climate change, populism, protectionism, and more, the country needs to chart a new course. This may well require policymakers to consider unconventional approaches to monetary and fiscal policy and, at the very least argues for important modifications of the current policy regime, including the autonomous mandate of the Bank of England.

At some point, there will be a major slowdown in economic activity. Yet the Bank of England has very little leeway to respond by cutting interest rates, and it has already adopted an armoury of unorthodox tools that may be decreasing in effectiveness. More radical monetary approaches would be likely to be politically controversial; and are not without risks. In these circumstances it would be a mistake to rely solely, or even largely, on monetary policy to maintain demand. It would be better to conduct monetary and fiscal policy in tandem, and for discretionary fiscal policy to be required to play a much more active role in demand management than hitherto. This would, for example, imply major extension of the automatic stabilisers and efforts better to calibrate discretionary initiatives with the business cycle.

But given the long-term pressures on the public finances, more fundamental changes in the structure of spending and taxation are needed, along with a redrawing of fiscal rules and targets, under independent budgetary oversight. The current, historically low, share in GDP of public spending is itself unsustainable in light of the demand for services of an ageing population; plans should be made to raise it closer to the European average. In the most extreme circumstances it might become necessary to waive the fiscal rules entirely and for the Bank of England directly to underwrite fiscal stimulus in order to sustain aggregate demand. It would be wise for the authorities to consider the options in detail now, while the environment is still relatively stable.

We propose a nowcasting system to obtain real-time predictive intervals for the first-release of UK quarterly GDP growth that can be implemented in a menu-driven econometric software. We design a bottom-up approach: forecasts for GDP components (from the output and the expenditure approaches) are inputs into the computation of probabilistic forecasts for GDP growth. For each GDP component considered, mixed-data-sampling regressions are applied to extract predictive content from monthly and quarterly indicators. We find that predictions from the nowcasting system are accurate, in particular when nowcasts are computed using monthly indicators 30 days before the GDP release. The system is also able to provide well-calibrated predictive intervals.

Emissions are directly linked to economic output and consequently subject to business cycle fluctuations. The present study analyses the interactions between climate policies and business cycles through the lens of a New Keynesian dynamic stochastic general equilibrium model. We compare a static cap-and-trade policy with a dynamically adjusting policy in terms of macroeconomic stabilisation, welfare and emissions price dynamics. The results of the quantitative evaluation suggest that a constant policy leads to lower aggregate volatility but is associated with larger welfare costs. In contrast, under the dynamic policy emissions prices and labour markets display less variations.

This article presents clear evidence that current announced climate pledges by Asia-Pacific countries – even those dependent on climate finance – are insufficient to keep the world within a 1.5°C temperature rise. The article provides analysis explaining why and how countries in the region are not being ambitious enough, and proposes three key steps for how to overcome a “decisiveness” deficit to spur further ambition.

In this paper, we investigate devolution in the Northern Irish context. The role of institutional geography is highlighted. Both contemporary and historical (c. 1921–1972) devolution models are discussed. It is argued that institutional factors provide explanations for economic weaknesses found under both devolution models. The evidence presented suggests that the institutional geography has both changed and exhibited continuities and we discuss these features in relation to contemporary issues. In particular, it is argued that institutional geography considerations have shaped the creation of the current review of tax devolution as well as the creation of an independent fiscal council.

• After growing by 3 per cent in 2014 the economy will grow by 2.3 per cent in 2015.

• Unemployment will drop below 6 per cent later this year.

• CPI inflation will be close to target this year and next; we expect interest rates to begin to rise gradually early next year.

Our estimates indicate that global output increased by 4.7 per cent in 2005. This followed an expansion of 5.2 per cent in 2004, and we expect further annual rises of 4¾ and 4½ per cent in 2006 and 2007, respectively. Global growth averaged just less than 3½ per cent per annum between 1975 and 2003, and exceeded 4½ per cent in only five of these years. We have not seen an extended global expansion of the magnitude expected for 2004–7 since the early 1970s. While growth in the OECD economies is expected to average 2.9 per cent per annum between 2004 and 2007, which is slightly higher than the average annual rate of 2.7 per cent experienced in 1975–2003, the bulk of the recent global strength comes from outside the OECD, as illustrated in figure 1. The acceleration of global growth can be attributed partly to developments in formerly centrally planned economies, such as Russia and other regions of the former Soviet Union. Severe recessions in these regions associated with the introduction of market forces and economic transition restrained world growth in the early 1990s. A strong rebound in these economies since the late 1990s has recently been further strengthened by rising prices for oil and gas. The former Soviet Union supplied 14 per cent of global oil in 2005 and holds over 30 per cent of proven global natural gas reserves. The high oil price is also expected to support growth in OPEC member states as well as other oil producing nations in South America and Africa. However, output growth in these regions has historically been relatively volatile, and the outlook for these economies remains a risk to our central forecast for world growth.

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.

The macroeconomic outlook for the Euro Area has improved. The first signs of recovery have already started materialising and although the second quarter of 2009 saw GDP contract by 0.2 per cent in quarterly terms, the pace of the decline eased. The first quarter of this year, with GDP collapsing by 2.5 per cent, probably constituted the sharpest contraction in the deepest recession the Euro Area has ever experienced.