UK productivity growth has been puzzlingly slow since the crisis. After averaging 2% every year in the pre-crisis decade, growth in labour productivity (output per hour worked) has slowed to an average of only 0.5%. Extensive research and commentary on the productivity puzzles has suggested myriad causes for the malaise – including ‘zombie’ firms hoarding resources, sluggish investment in the face of uncertainty, mismeasurement and more – and have dismissed others that no longer seem plausible – including temporary labour hoarding. Using firm-level data, I show that slower aggregate growth is entirely driven by the more productive firms in the economy.
Philip Bunn, Alice Pugh and Chris Yeates
Following the onset of the financial crisis, the Monetary Policy Committee (MPC) cut interest rates to historically low levels and launched a programme of quantitative easing (QE) to support the UK economy. How did this exceptional period of monetary policy affect different households in the UK? Did it increase or decrease inequality? Although existing differences in income and wealth means that the impact in cash terms varied substantially between households, in a recent staff working paper we find that monetary policy had very little impact on relative measures of inequality. Compared to what would have otherwise happened, younger households are estimated to have benefited most from higher income in cash terms, while older households gained more from higher wealth.
We now have a dedicated staff-run twitter handle for Bank of England Research, @BoE_Research. From now on, this will be the main place for all our research related tweets, including those about Bank Underground. This gives us space to cover blog posts and Staff Working Papers in more depth, plus conferences, journal publications and other news involving Bank of England research(ers). As with Bank Underground and Staff Working Papers, it’s staff-run rather than representing official views of the Bank.
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John Lewis, Managing Editor
In the first age of financial globalisation, from around 1880 to 1913, many countries tied their currencies to the mast of gold. The Bank of England’s unparalleled influence over this period is depicted by the Lady of the Bank, seated on the globe with a shower of gold coins to one side, which is carved into the Bank’s pediment. There was an old saying in the City that the Bank’s rate could draw gold from the moon. But could it?
Aakash Mankodi and Tim Pike
Tetlock and Gardner’s acclaimed work on Superforecasting provides a compelling case for seeing forecasting as a skill that can be improved, and one that is related to the behavioural traits of the forecaster. These so-called Superforecasters have in recent years been pitted against experts ranging from U.S intelligence analysts to participants in the World Economic Forum, and have performed on par or better by accurately predicting the outcomes of a broad range of questions. Sounds like music to a central banker’s ears? In this post, we examine the traits of these individuals, compare them with economic forecasting and draw some related lessons. We conclude that considering the principles and applications of Superforecasting can enhance the work of central bank forecasting.
Joseph Noss, Liam Crowley-Reidy and Lucas Pedace
Anna Orlovskaya and Conor Sewell
Peer to Peer (P2P) lending is a hot topic at Fintech events and has received a lot of attention from academia, journalists, various international bodies and regulators. Following the Financial Crisis, P2P platforms saw an opportunity to fill a gap in the market by offering finance to customers and businesses struggling to get loans from banks. Whilst some argue they will one day revolutionise the whole banking landscape, many platforms have not yet turned a profit. So before asking if they are the future, we should first ask if they have a future at all. Problems such as a higher cost of funds, or limited ability to scale the business, may mean the only viable path is to become more like traditional banks.