• The government's new plans for departmental spending are affordable, but the fiscal loosening does pose a threat to the outlook for inflation and interest rates.

• Growth will pick up next year as export performance improves because of greater buoyancy in world trade and the fall in the exchange rate.

• In order for inflation to stay on target in 200I, interest rates will have to rise by half a percentage point by the start of next year.

• The upward pressure on interest rates will be limited by a decline in the growth of private sector spending as households increase their saving rate and non-manufacturing business investment increases less rapidly.

• Inflationary pressures should also be restrained by a recovery in productivity growth.

• • Strong Asian growth is boosting the recovery in the world economy, with global GDP now forecast to increase in 2000 by 4.6 per cent, the highest since 1996.

• • Inflationary pressures in the US will prompt the US Fed to raise interest rates a further three- quarter points by the end of the year.

• • Inflation in the Euro Area will remain above 2 per cent in 2000 and 200I, and this will lead to a further rise in interest rates of half a percentage point by the end of the year.

• • The robust Asian recovery is stimulating the Japanese economy which is now expected to grow by almost 2 per cent in 2000.

The National Institute held a meeting on 6 June 2000 at the House of Commons and hosted by Dr Vincent Cable MP to discuss the high exchange rate. The panel of speakers comprised Mr Ed Balls (HM Treasury), Lord Lawson, Dr Vincent Cable MP, Dr Diane Coyle (The Independent), Mr Gerald Holtham (Norwich Union), Mr Anatole Kaletsky (The Times) and Mr Martin Weale (National Institute of Economic and Social Research). The meeting was chaired by Sir Peter Middleton. Contributions by the speakers were followed by discussion from the floor. This record of the meeting is intended to provide a contribution to the continuing debate about the exchange rate which stood at £1 = €1.59 on the day of the meeting.

The government's plans for public sector spending set out in its recent spending review caused relatively little surprise as they mainly confirmed what had already been announced in Budget 2000. This was that overall spending, Total Managed Expenditure (TME), would rise by 4 per cent per annum in real terms over the four years to 2003–4. More detail did emerge on how this overall increase would be allocated among the individual government departments. Falling debt interest payments and the effects of lower unemployment on welfare payments and tax receipts will allow departmental spending to rise by an average of 6 per cent per annum in real terms over the same period. A substantial part of this increase is earmarked for capital projects, with the capital budget more than doubling over the four-year period. This means that departmental current spending will rise at the slower rate of about 3 per cent per annum in real terms.

One of the intriguing features of the UK economy's recent behaviour is that it has combined a strong exchange rate with an apparently tight public sector budgetary position. This is unusual because a strong and uncompetitive exchange rate is more commonly associated with a loose fiscal position where the public sector is using more resources than it has raised by way of taxation. In that situation, upward pressure on interest rates and the exchange rate crowd out other activity and thereby free up resources for use by the public sector. It is largely for this reason that trade groups representing firms in the manufacturing sector have been lobbying for continued restraint on public sector spending as a means of preventing further upward pressure on the exchange rate.

Global economic activity has continued to strengthen significantly since the end of last year, with all the major regions experiencing cyclical upswings in economic activity for the first time since 1994. World GDP is expected to rise by over 4½ per cent this year (on a purchasing power parity basis) and the volume of merchandise trade is projected to rise by 10½ per cent, approximately twice the growth seen last year. In the industrialised economies growth is expected to turn out at 4 per cent this year, which would be the fastest experienced since 1988.

This article uses the ARD, the new longitudinal database of the Census of Production, to analyse productivity at the establishment level in the two cycles of 1973–9 and 1979–89. Contrary to a commonly held view, closures did not play a major role in accounting for productivity growth in 1979–89. Establishments which shut had lower productivity than survivors but the exits were replaced by entrants whose productivity was also lower. Hence most of productivity growth was due to growth within survivors. Most productivity growth occurred in establishments which reduced employment. But despite an overall fall of a quarter in employment, 16 per cent of productivity growth occurred in establishments which expanded employment. The main difference between 1973–9 and 1979–89 was in the productivity growth rate amongst survivors. In 1973–9, it was negative overall and over half of employment in 1973 was in establishments where productivity subsequently fell.

This article explores the implications of alternative policy regimes for gender wage inequality. Against the background of a description of recent changes in pay ratios of men and women in Britain, the focus is primarily on calculating the likely effects on gender wage ratios of introducing the statutory minimum wage in the UK. The effects of alternative options are also assessed in part; giving women men's average hourly earnings, leaving occupations unchanged, and redistributing women through occupations in the same proportions as men, leaving their occupational average pay unchanged. The largest effects on pay ratios come from giving women the same pay as men in their existing occupations. However, a statutory minimum wage of £3.60 per hour does improve the gender pay ratio and helps women at the lower end of the pay spectrum. It is also considerably easier to implement than other options.

The National Institute had planned a seminar to mark the launch of Christopher Dow's new book Major Recessions. The seminar had to be cancelled, because Christopher Dow died a few days before it was due to be held. As some kind of substitute, the CLARE Group decided to publish this review article. The sections of the article have different authors, but they have been designed to be complementary in scope and the authors have discussed them with each other and with other members of the Group, especially A.J.C. Britton, W.J. Carlin, C.A.E. Goodhart, P.M. Oppenheimer, M.V. Posner and J.R. Sargent. The Review is pleased to give hospitality to CLARE Group articles, but is not necessarily in agreement with the views expressed.

Robin Matthews starts with some comments on the style in which, and background from which, Dow wrote this work and which concentrates on five major British recessions of the 20th century. He presents five of Dow's more general conclusions with comments. This section is followed by a review by Mike Artis of Dow's analysis of the five major recessions (1920–1, 1929–33, 1973–5, 1979–82 and 1989–92) regarded as episodes in economic history. One of Dow's main theses is that major recessions permanently reduce productive capacity. Martin Weale examines statistically his suggestion that they reduce demand by consumers whose income expectations adjust in that way — for which he finds little support. John Flemming addresses the 25 ‘golden’ postwar years without a major recession presenting a critical analysis of Dow's method of distinguishing between major and minor recessions. Matthews and Flemming consider his treatment of the question whether major recessions are inevitable, how they might be avoided, and how their effects might be mitigated. While hankering for postwar controls Dow's Keynesianism is subtle. Finally Matthews suggests an analogy with Schumpeter's Business Cycles which survived a critical review by Kuznets, Dow's treatment of his data being much more thoughtful than Schumpeter's even if some parts of his model seem rather shaky.