It’s time the Bank of England rethinks monetary policy – and its own methods

The Bank of England’s handling of inflation has been met with increasing levels of criticism.  Despite its suite of academically fashionable mathematical and econometric models, the Bank seems to be acting in a daze, unable to comprehend what is going on. A paper just published in the American Economic Review advocates an alternative way of […]

Sunak’s flexibility has been curtailed by our undue reverence for the Bank of England

Rishi Sunak will deliver an updated Autumn Statement next week, after Liz Truss’ so-called “mini-budget” triggered her demise. His freedom for manoeuvre has been sharply contained by the new found reverence being accorded to the Bank of England and the Office for Budget Responsibility. The Bank of England has forecast a long recession, which could […]

Central banks have fooled themselves into thinking they have power over inflation

The failures of central banks around the world to anticipate and control the current upsurge in inflation are now apparent to all. What has been going on with the highly technical models which economists in these institutions build to try and explain inflation? If we look under the bonnet, we find a debate which is […]

Does the productivity gap actually exist?

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Whoever wins the election tomorrow will have to grapple with what appears to be a fundamental economic problem. Estimated productivity growth in the UK is virtually at a standstill. The standard definition of productivity is the average output per employee across the economy as a whole, after adjusting output for inflation – or “real” output, […]

The so-called ‘output gap’: another piece of economic mumbo-jumbo

The concept of the’ output gap’ is central to mainstream macroeconomics. It is not merely of academic interest. The Office for Budget Responsibility (OBR) has a specific requirement to estimate the output gap, which it defines formally as “the difference between the current level of activity in the economy and the potential level it could […]