Category Archives: Macroeconomics

Using machine learning to understand the mix of jobs in the economy in real-time

Arthur Turrell, Bradley Speigner, James Thurgood, Jyldyz Djumalieva and David Copple

Recently, economists have been discussing, on the one hand, how artificial intelligence (AI) powered by machine learning might increase unemployment, and, on the other, how AI might create new jobs. Either way, the future of work is set to change. We show in recent research how unsupervised machine learning, driven by data, can capture changes in the type of work demanded.

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Filed under Macroeconomics, New Methodologies

Pumping Iron: How can metals prices help predict global growth?

Tom Wise

Estimates of GDP growth are published with a considerable lag – even in some major economies we still only have partial data on what GDP growth was in Q1 2018. So ‘nowcasting’ GDP using more timely indicators of economic activity is an important way of assessing the strength of the world economy in real time. Good indicators are timely, correlated with measures of world activity and should outperform simple benchmarks. Unlike other global indicators such as business surveys or trade data, metals prices are available minute by minute. They also tend to move closely with world GDP. This post assesses how well they perform at nowcasting world GDP.

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Filed under International Economics, Macroeconomics

Tight labour markets and self-service beer: is the productivity slowdown about to reverse?

Will Holman and Tim Pike

Firms are increasingly investing in automation, substituting capital for labour, as workers become more scarce and costly. We are seeing multiple examples, from automation in food processing to increasingly-common self-service tills. This push for productivity growth is one of the key themes from our meetings with businesses in the past year, which we think suggests a reversal of a decade-long trend.

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Filed under Macroeconomics, Monetary Policy

Would a Central Bank Digital Currency disrupt monetary policy?

Ben Dyson and Jack Meaning

A “Central Bank Digital Currency” (CBDC) may sound like it’s from the future, but it’s something that many central banks are researching today, including those in Sweden, Canada, Denmark, China, and the European Central Bank and Bank of International Settlements (BIS). In a new working paper, we set aside questions about the technological, regulatory and legal aspects of central bank digital currency, and instead explore the underlying economics. Could the existence of a CBDC make it easier or harder for central banks to guide the economy through monetary policy? And could the existence of CBDC make the monetary transmission mechanism (MTM) faster or slower, stronger or weaker?

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Filed under Banking, Currency, Macroeconomics, Monetary Policy

Home grown financing: How small business owners use their own houses to support investment

Saleem Bahaj, Angus Foulis and Gabor Pinter

Apocalypse Now is widely regarded as a masterpiece of the new Hollywood era. Director Francis Ford Coppola displayed audacious vision and a willingness to take risks. But we don’t just mean artistic risk. Mr Coppola gambled financially too: he staked his Napa Valley house and vineyard on the film, pledging it order to get the $32 million in loans necessary to keep the production on the road.  While his movie was exceptional, there is nothing unusual about Mr Coppola’s financial strategy.  Small business owners worldwide use their personal assets, and often their house, to back loans to their firms: in a new paper, we use microdata for several thousand firms to show how important this can be for UK investment.

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Has the UK’s demand for cars run out of gas?

Simon Kirby, Andre Moreira and Michal Stelmach

New car registrations, a timely indicator of the cyclical position of the economy, fell in 2017 for the first time since 2011. Some have attributed this drop to tax changes which took effect last April. But we think the squeeze on real incomes was a more significant factor. Our analysis also suggests that the rapid growth in new car sales seen from 2013-16 was unlikely to be sustained. Given the expected path of household income we expect new car purchases to remain subdued in 2018, compared to levels seen in recent years.

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Bitesize: The past decade’s productivity growth in historical context

John Lewis

How poor has the past decade of productivity growth been by historical standards? Exceptionally.

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Filed under Bitesize, Economic History, Macroeconomics

What can regional data tell us about the UK Phillips Curve?

Alex Tuckett

The Phillips Curve (PC) is an old concept in economics, but it is a durable one. The simple idea behind the PC is that the lower the rate of unemployment, the faster wages will grow. If the PC has changed over time, that can have important implications for monetary policymakers. Analysis of regional UK data suggests that the PC has shifted down over time, but has not necessarily become flatter. Higher levels of educational attainment are likely to have contributed to this shift.

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Filed under Macroeconomics, Monetary Policy

Bitesize: UK real interest rates over the past three centuries

John Lewis

How low are UK real interest rates by historical standards? Using the Bank’s Millennium of Macroeconomic Data, I compute real bank rate, mortgage rates, and 10-year government bond yields over time.

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Filed under Bitesize, Economic History, Financial Markets, Macroeconomics

The UK’s productivity puzzle is in the top tail of the distribution

Patrick Schneider

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.

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Filed under Macroeconomics, New Methodologies