Monday
Mar182013

UK quarterly NGDP

I've just been taking a look at the second estimate of GDP. Here's what quarterly NGDP looks like (compared to quarter of previous quarter). 

Series code: IHYO.

It's becoming increasingly hard to argue that expectations should switch to a new lower NGDP growth rate, rather than policymakers should ensure that NGDP reflects estasblished expectations. For more see Britmouse.

P.S. Here's the forecast YOY growth of NGDP from the March 2012 OBR report:

Monday
Mar112013

Can we measure uncertainty?

Last week saw the 7th quarterly meeting of Kaleidic Economics, and the theme was uncertainty. The report is available here. In it, we argue that attempts to measure uncertainty have insurmountable methodological flaws, but that doesn’t mean the Austrian school cannot contribute to a contemporary and progressive research agenda. In particular, we pose several questions relating to how "regime uncertainty" can be operationalised:

  • To what extent is regime uncertainty an extreme form of policy uncertainty? At what point do policy changes threaten the “regime”?
  • In terms of tax reform people tend to like changes provided they are anticipated. Very few people want the tax code to stay the way it is. Therefore stability is less important than predictability. Therefore can policy changes reduce uncertainty, provided they’re communicated clearly and help form expectations?3
  • Regime uncertainty is typically applied to the US economy during the Great Depression, and the “Great Recession”. It’s also been applied to the UK economy. On the surface, one would expect it to be especially pronounced during coups and other radical constitutional changes. It would be interesting to see cross country comparisons and detailed case studies
  • The basic idea is that a stable investment climate is important in generating confidence. But what if the present investment climate is inhospitable? To what extent can regime uncertainty lead to good economic outcomes?
  • Is it the uncertainty that’s the problem, or the prospect of worse economic policies? In crude terms can we compare regime uncertainty with regime shittiness?
  • Uncertainty doesn’t disappear when times are good, so what can we learn about the issue by comparing recessions with times of economic growth?
  • Does regime uncertainty mean that investors hold off on investment (this is argued by Bernanke 1983), or alter the types of investment they make? 

We also draw attention to measures of private investment, which we've updated:

Addendum: In the comments section Nicolas makes an important point about measuring regime uncertainty. It reminded me that I had intended to discuss this post by Lars Christensen in the report. Lars says,

My favourite source for a numerical measure of these uncertainties is the conservative Heritage Foundation’s Economic Freedom Index. We can use the sub-index for “Rule of Law” in the Economic Freedom Index as a proxy for “regime uncertainty”.

I think this makes a lot of sense, but I find it interesting to note that (i) this measure is only calculated on an annual basis; (ii) only exists from 1995; and (iii) "property rights" is on a 20 point scale so it doesn't change much. So I'm not sure how much help it is at assigning a causal role to regime uncertainty during recessions. For example, here's the "regime uncertainty" for the US since 2004:

Lars has some other great posts on regime uncertainty here and here (written by Alex Salter).

 

Friday
Jan182013

What is general government expenditure?

There is some debate at the moment about the most appropriate way to measure government expenditure. I've been especially interested in understanding the differences between the figures reported by HM Treasury, and those published by Eurostat. After several emails with the Office for National Statistics, I now understand where the Eurostat data comes from. This article provides an explanation.

General government expenditure can be found using the following steps: 

  1. Go to the ONS release for "Maastricht Supplementary Data Tables" (the most recent one is January 2013 and can be found here. As far as I can tell there's no stable URL for them so I would suggest entering "Maastricht" into the search box of the index page for all publications).
  2. Click on "Data in this release" in the top right corner.
  3. Download the excel file for "ESA Table 25 Quarterly Non-Financial Accounts of General Government Expenditure".
  4. Select Tab 2501 and look for the column "Total government expenditure" (possibly column T).

Here is a chart showing expenditure from January 2006 - December 2012:

 

Note that this measure of general government expenditure includes transfer payments, and it also includes the income from sales of goods and services. The latter are subtracted in order to generate Total Managed Expenditure (TME), a series that is not published by the ONS. 

Wednesday
Jan022013

The growth rate of MA halves

Apologies for not updating our data section as often as we'd like, but October figures are now out and show an interesting decline in the growth rate of MA, from +8% in July, August and September, to +4% in October 2012. M4ex continues to grow at a palsy rate of >4%, whilst the old measure of broad money, M4 continues to contract.

 

See here for more details.

Wednesday
Dec052012

The Unintended Consequences of Extraordinary Policy

Today saw the 6th Quarterly Meeting of Kaleidic Economics. The main point of discussion was the distributional effects of QE and how the policy has altered from when it was first implemented. Reproduced below is the chart showing the extent to which the Bank of England has emerged as a buyer of UK government debt.

You can download the report here.

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