Output in several of the economies of East Asia fell very sharply at the turn of the year, but those countries are now leading the global recovery. This points to a strengthening of domestic demand in these largely export-oriented economies, and our forecast shows some rebalancing of global demand. This will allow the large current account surpluses in China and Japan to narrow over the next few years, and help sustain the recovery in the rest of the world. The Japanese current account is expected to approach balance by 2013, from a surplus of nearly 5 per cent of GDP in 2007, while the Chinese currrent account surplus is expected to narrow to about 8 per cent of GDP from a peak of over 12 per cent in 2007.

The persistent weakness of UK economic growth figures has dominated recent economic commentary. This debate continued with the release of the Office for National Statistics‘ (ONS) preliminary estimate of GDP growth for the second quarter of this year. The ONS estimates that the economy enjoyed only a modest expansion in the second quarter: 0.2 per cent per quarter. This implies the level of output is little changed from the third quarter of 2010. ‘One-off effects’ are partly responsible for the weak growth in the second quarter. We expect GDP growth to accelerate in the third quarter of this year (see figure 1), but this increase is likely to be flattered by the events of the second quarter.

The forecast ‘on unchanged policies’ is not a forecast of what is likely to happen, since unemployment in the winter of 1968 would probably reach a recorded figure of 650-700 thousand, with still a strong underlying upward trend. The Government, even if it has accepted the idea of running the economy with a higher level of unemployment—say 2 1/4-2½ per cent— will need to intervene, and probably need to intervene fairly soon (page 30) if the figure is to level off within these margins.

This note, by Mrs. K. Jones, is one chapter of a study on ‘Some Economic Aspects of Immigration’, which is being undertaken at the Institute. Research is still in progress on other aspects, such as employment, earnings, expenditure, savings and remittances, housing and capital requirements. It is hoped to publish the results as an Occasional Paper by the end of 1968.

The production of this forecast is supported by the Institute's Corporate Members: Bank of England, HM Treasury, Mizuho Research Institute Ltd, Office for National Statistics, Santander (UK) plc and by the members of the NiGEM users group.

In this paper we revisit the issue of currency regime choice for an independent Scotland using an international macroeconomic/ finance framework. Specifically, we consider the main competing proposals for currency choice with an emphasis on the SNP’s official policy of the informal use of sterling post-independence. We conclude that from a macroeconomic perspective this option is unlikley to be credible to international capital markets. The option that would be credible, and avoids the austerity associated with the choice of a fixed exchange rate option, would be a free float at least during the transition period of independence.

The UK faces a number of economic challenges in the short to medium term. Prior to COVID-19, renegotiation of trading arrangements with the European Union was the most prominent of these. We build on existing macroeconomic analysis by assessing prospects for the UK’s regions generated by combining a global macroeconometric model and a regional computable general equilibrium of the UK. A central macroeconomic scenario shows a national average annual GDP growth rate of 1.7 per cent to 2044. When the macroeconomic scenario is applied across regions, growth rates range from 1.6 per cent for Cambridge to 2.2 per cent for Pembrokeshire; the standard deviation is low at 0.07 per cent and the coefficient of variation is 0.04 per cent. In contrast, much wider variation is observed in the standard deviation for exports (0.36 per cent), investment (0.11 per cent) and consumption (0.14 per cent). The country results favour Scotland, which grows at an annual rate of 1.8 per cent, whereas Wales is the slowest growing of the countries at 1.7 per cent. Consistent with the macroeconomic analysis, international trade is the most important contributor to the regional variation in growth rates. We also analyse the effects of higher government consumption relative to the forecasts and find most regions are predicted to experience lower economic activity except the handful in which government consumption is a much higher share of GDP than average.

Offshore wind farms (OWF) are now in operation and increasingly under construction as scalable, sustainable energy sources. In fact OWFs are currently the cheapest form of new energy projects in Europe. The levelized cost of energy (LCOE) for OWF has fallen drastically due to decades of innovation facilitated by both taxpayer and private sector funding. This emerging industry is experiencing massive worldwide growth with the potential to accelerate the decarbonization of regional and the global economy as well as bring a reliable source of green hydrogen into commercial use, all with minimal disruption to ecosystems and impacts on biodiversity. This paper provides a historical perspective of wind energy harnessing and shows that wind turbines are the oldest, largest and one of the smartest machines. We also highlight the potential of offshore wind energy to provide new solutions to (a) meet clean energy demand for a growing world population, (b) improve energy security of nations through other downstream technologies such as production and storage of dispatchable fuel (such as green hydrogen battery storage) and (c) through supply complementarity improve resilience of nuclear power plants in high-seismic-activity areas. Offshore wind industry can also become a gold standard for future industries, and the paper provides insights into the new green economics and jobs and factories for the future. We show that environment-friendly regulation is driving innovations even further to enhance sustainability of OWF. Examples include material recycling, landfill ban on blade disposal and ecofriendly low-noise offshore construction to protect biodiversity.

Against the background of the European Commission’s reform plans of the Stability and Growth Pact, this paper uses NiGEM to simulate the macroeconomic implications of re-applying the fiscal rules in 2024. Next to returning to the unreformed rules, the most prominent options include an expenditure rule. Our results indicate that re-applying the unreformed rules leads to severe cuts in public spending. An expenditure rule would, however, not necessarily alleviate the fiscal adjustment burden. Instead, our simulations show that great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way.

Mobile phones have been central to ICT innovation since the introduction of the smartphone and constant-quality prices are a barometer of their economic impact. Official consumer price indices (CPIs) indicate that impact differs wildly across countries: for the 2008–18 period, average annual rates of mobile phone inflation range from no change to a 25 per cent decline among 12 key countries examined in this paper. Although evidence indicates certain fundamental factors are at play, mis-measurement may lead the spread in rates to be overstated. Examination of methods employed in CPI calculation, including quality adjustment and index formulas, illuminates but does not resolve the mystery.

Trade issues lie at the heart of the two biggest constitutional challenges the UK has faced in decades: Brexit and Scottish independence. Brexit has demonstrated the economic importance of borders and led to renewed calls for Scottish independence. While there are a range of possible trading arrangements an independent Scotland could pursue, all of them involve economically significant change. In this paper, we describe Scottish trade patterns and review the range of options that a newly independent Scotland might have for its trading arrangements. We then model the relative economic importance of these different potential trading arrangements.

Should the transmission of monetary policy be understood in terms of its impacts on interest rates and bond yields, or monetary aggregates? This article considers the relationship between those aggregates and inflation, both over the past and more recently. And explains how the MPC takes account of “QT” in its forecasts.

The world of work is changing in ways that were not anticipated at the start of the century. Technology, globalisation and the creation of new business models based on digital platforms are creating new types of jobs, contracting arrangements and transactions. As Diane Coyle describes in her paper on work in the digital economy, temporary and flexible contracts are proliferating, with an estimated 905,000 people on ‘zero hours’, 29 per cent higher than in 2014. While remote working has been common in sectors such as IT for some time, the workplace itself has transformed for many and is in some cases virtual rather than physical. These changes offer opportunities for some, including those who are excluded from traditional work modes, and challenges for others. Platform models such as the on-line marketplace Etsy may facilitate access to the formal labour market for the economically inactive or long-term unemployed but offer little social protection. Regardless of the outcome of current legal disputes over the employment status of ‘employees’ or ‘service providers’ in the ‘gig’ economy, because of difficulties in enforcement, these new forms of work carry a strong potential to exacerbate inequalities in the labour market which are apparent in disparities by social class, ethnicity and gender.

The short-term economic outlook has improved significantly in nearly all parts of the world economy over the past year. Growth has continued at a rapid pace in the North American economies, helped by the renewed vigour in equity prices in recent months and further strong growth in labour productivity. GDP in the United States is estimated to have risen by over 4 per cent in 1999, for the third year in succession. We expect to see further growth of 3¾ per cent this year. The European Union economies have embarked on a cyclical upturn, helped by accommodative monetary policies and the impact of improved external demand.