A dynamic model of financial balances for the United Kingdom

Stephen Burgess, Oliver Burrows, Antoine Godin, Stephen Kinsella and Stephen Millard.

How can large open economies deal with persistent imbalances now and into the future? This question became particularly pertinent in the Great Moderation where, despite stability in output and inflation, sectoral financial balances, both within and across countries, widened. In a recent Staff Working Paper, we developed a model of the UK economy to assess how economic and financial imbalances are likely to evolve over longer periods.  Here, we show how we can use this model to examine the evolution of financial balances under different scenarios.  We think models like this can form a useful addition to the suite of models called upon by policy-makers to help in their decision making.

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