Financial services exports and financial openness: two sides of the same coin

Carlos Eduardo van Hombeeck

The UK has a comparative advantage in financial services. But specialisation in this activity brings with it the challenge of the large gross capital flows that are linked to financial services exports.

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Filed under Bitesize, Financial Stability, International Economics

Voting with their wallets? Consumer expectations after the EU referendum

Tamara Li, Nicola Shadbolt, Thomas Stratton and Gregory Thwaites

Consumption growth remained fairly steady in the immediate aftermath of the UK vote to leave the European Union in June 2016. But how did consumer expectations evolve in the first months after the referendum? We show with the Bank’s in-house household survey that ‘Leavers’ became more positive about the economy and their own financial situation after the referendum, with the opposite true for ‘Remainers’, and that this was reflected in spending by the two groups. But the size of the effect was small.

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Who’s driving consumer credit growth?

Ben Guttman-Kenney, Liam Kirwin, Sagar Shah

Consumer credit growth has raised concern in some quarters. This type of borrowing – which covers mainstream products such as credit cards, motor finance, personal loans and less mainstream ones such as rent-to-own agreements – has been growing at a rapid 10% a year. What’s been driving this credit growth, and how worried should policymakers be?

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Filed under Financial Stability, Macroeconomics, Macroprudential Regulation, Microprudential Regulation

How does uncertainty affect how UK firms invest?

Marko Melolinna and Srdan Tatomir

Uncertainty is in the spotlight again. And the MPC believe it is an important factor influencing the slowdown in domestic demand (August 2017 Inflation Report). Previous work by Haddow et al. (2013) has found a composite aggregate indicator of uncertainty combining several different variables that does appear to have explanatory power for GDP growth; but as Kristin Forbes notes these measures correlate better with consumption than investment. So in this blog post, we look at firm-level data to explore measures of uncertainty that matter for how firms invest in the United Kingdom. Our aggregate measure of uncertainty has a better forecast performance for investment than the composite aggregate indicator does.

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Filed under Financial Markets, Macroeconomics

The Bank Underground Christmas Quiz 2017

As the blog hangs up its stocking and takes a well-earned festive break, we leave you with our annual Christmas brain-teaser. Perhaps the greatest only central bank themed festive quiz on the planet.  Have a very Merry Christmas, a Happy New Year and we’ll see you in January… Continue reading

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Our top 10 posts of 2017

As the year draws to a close, we wanted to take a quick but nostalgic look back at the past twelve months on the blog. It’s been our best year to date in terms of hits, and in September we notched up our one millionth view.  Here are our ten most popular posts of 2017, as measured by number of views, just in case you missed them first time round…

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Sterling weakness: FX mismatch risks in the UK corporate sector

Rajveer Berar

What could falls in sterling mean for UK firms’ ability to sustain foreign currency (FX) debt obligations? The value of sterling began falling around two years ago and dropped further after the EU referendum – remaining around these lower values ever since. There is every possibility that sterling may stay low for the foreseeable future – creating both potential winners and losers. In this piece, I investigate one particular channel for losses related to sterling weakness: whether UK firms could find meeting their FX debt obligations more challenging. By reviewing market intelligence, market prices and derivatives databases, I find limited evidence that sterling weakness has yet produced any significant changes to UK firms’ ability to manage their FX debt obligations.

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Filed under Currency, Financial Stability, Macroeconomics

Looking inside the ledgers: the Bank of England as a Lender of Last Resort

Michael Anson, David Bholat, Miao Kang and  Ryland Thomas

Imagine if you could peek inside the Bank’s historical ledgers and see the array of interest rates the Bank has charged for emergency loans in the past. If you could get the inside scoop on how many of these loans were never repaid, and how that impacted the Bank’s bottom line? Now you can.  We have transcribed the Bank’s daily transactional ledgers and put them into an Excel workbook for you to explore. These ledgers contain a wealth of information on everyone who asked the Bank for a loan during the 1847, 1857 and 1866 crises.

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Filed under Banking, Economic History, Financial Markets

Optimal quantitative easing

Richard Harrison

Ben Bernanke famously remarked that “the trouble with QE is that it works in practice but not in theory”.  And ahead of its adoption, many academics were sceptical that QE would have any effects at all.  Yet despite QE being a part of the monetary policy landscape for nearly a decade, the bulk of academic research on QE has been on its empirical effect, with relatively little on theory and less still on normative policy questions. In a recent Staff Working Paper I develop a model which can provide answers to questions such as: “How should monetary policymakers return their instruments to more normal levels?” and “Should QE be part of the regular monetary policy toolkit?”

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Filed under Macroeconomics, Monetary Policy