The main text of this chapter describes the current economic situation and the outlook to the end of next year. A brief account is also given of two projections to 1991. This is followed by a set of short notes dealing with some aspects of the domestic economic situation in rather more detail. The forecasts were prepared by Andrew Britton, Andrew Gurney and Rhys Herbert, but they draw on the work of the whole team engaged in macroeconomic analysis and modelbuilding at the Institute.

Beginning with this Review, the World Economy chapter contains a number of changes in format and content. The first half of the chapter presents the main forecast, which for the first time is produced with the aid of a quarterly econometric model, GEM. The second half of the chapter will be devoted to one or more topical issues concerning the world economic outlook, using analysis based on econometric evidence or model simulations. In this Review we look at the prospects for the US current balance. An appendix briefly outlines the structure of GEM.

The high technical quality and reliability of Japanese manufactures raises questions of how the training and education of their workforce differs from Britain's. The standards reached by Japanese 15-18 year-olds in their technical and vocational secondary schools—and the number of pupils reaching them—are described in this paper and compared with Britain, as well as the standards reached in mathematics during compulsory schooling till 15. This article follows earlier studies of German and French schooling and vocational preparation (see this Review, August 1983, February and May 1985, and May 1986).

Japan … can hardly fail to become a teacher ere long. Alfred Industry and Trade, 1923.

In this Review the Institute's world economic forecasts are for the first time produced with the aid of a large quarterly econometric model. The general features of this model are described in an Appendix to the World Economy chapter in this Review. The model is based on the WEP (World Economic Prospects) model which has been operated and developed by economists in HM Treasury for more than a decade. However, exchange rates in WEP are exogenous, and this article discusses the estimation of an exchange-rate system for the model, and its implications in terms of overall model properties.

In January 1984 the Bank of England Panel of Academic Consultants held a meeting to discuss the economic recovery in Britain in the early 1930s. The proceedings were published in Panel Paper no. 23. There were two main papers, one by David Worswick and the other by myself, Forrest Capie and Brian Griffiths (BCG). Our main contribution was to argue that the recession was largely triggered on the supply side rather than the demand side.