Project team
Project leaders: Graham Gudgin, Ken Coutts (Selwyn College, Cambridge)
Co-investigator: Saite Lu (Emmanuel College, Cambridge)
Project status
Ongoing
Project dates
2015-2026
Overview
Background
This is a longstanding project stimulated originally by the slow growth in GDP and productivity in the UK economy following the banking crisis of 2008/9. Our judgement was that the causes of slow growth were poorly understood in both the academic and policy professions. We also viewed the mainstream general equilibrium macro-economic models as not up the task of explaining what was happening to the UK economy in ways which could reliably underpin the development of effective policies to achieve faster growth. The Brexit referendum result, COVID and the Ukrainian war caused economics shocks which delayed the regular use of the model for policy purposes but Brexit did lead to a number of off-model analyses aimed at informing the model about potential changes in UK growth outside the EU.
Aims and objectives
The aim has been to maintain the UKMOD model and its extensive time series database on an annual and semi-annual basis. The ultimate aim of using the model to inform macro-economic policy has been delayed by the Brexit, COVID and Ukraine war shocks but the intention is to use the model for a number of articles analysing current macro-economic policy. The first of these appeared in the Daily Telegraph in June 2024. The aim of producing a fully stock-flow consistent model along the lines pioneered in Monetary Economics by Wynee Godley and Marc Lavoie is currently being taken forward with the assistance of Professor Gennaro Zezza of University of Cassino, Italy and the Levy Economics Institute of Bard College, NY. Professor Zezza was a close collaborator of the late Wynne Godley and will assist in extending the UKMOD model with a major financial module including 7 assets and liabilities across 7 sectors of the UK economy. The aim is to enable monitoring and prediction of financial imbalances, particularly in the banking sector, which potentially threaten the financial stability of the economy as in 2008/9.
Methods
The data is currently updated with the publication of the Blue Book National Accounts each Autumn. Software has been written to enter all of the relevant national accounts time series into the model databank alongside the latest values of the many time series which are not part of the national accounts (population, employment, interest rates and non-UK variables etc). The 100 or so econometric equations are re-estimated each year, currently using data up to 2022. Partial annual data for 2023 and 2024 are used for forecast testing. In 2025, Bill Martin published 2 working papers on issues relating to the UK’s national accounts for the post-1945 period, pointing out errors made by the Office of National Statistics’ ‘backcasting’ of data.
Progress
Work during the year August 2024-July 2025 consisted of these main strands:
- Maintenance and updating of the CBR macro-economic model of the UK economy (UKMOD). The annual round of updating the UKMOD macro-economic model data and equations has been more arduous this year because of the unavailability of Neil Gibson. Neil had written a complex programme to read in the latest National Accounts Blue Book revisions and an extensive collection of data from other sources. Neil is now Permanent Secretary in the Department of Finance in the Government of Northern Ireland and lacks the time to work on the model. As a result we have devised an alternative and somewhat simpler data system with the assistance of Youngmin Lee who was In Cambridge last year but has now returned to the Finance Ministry in Seoul. This data system is now complete and available for use in future years. It was used this year to update the UKMOD database. Further forecast data on international trade and other variables external to the UK were obtained from Oxford Economics. With new data in place, the econometric equations in the model have been re-estimated and the model revised to generate annual forecasts from 2024 onwards.
- Work has continued in conjunction with Professor Gennaro Zezza on the major extension of the model to include a financial module (FINMOD) with a range of assets and liabilities for each sector. When completed this will make the model into a full-developed stock-flow consistent system along the lines laid out in Godley and Lavoie’s ‘Monetary Economics’. Progress has been slow but we hope to have a working system in 2025.
Output
Journal articles
Lu, S., Coutts, K. and Gudgin, G. (2024) “Energy shocks and Inflation episodes in the UK.” Energy Economics, 129: 107208 (DOI: 10.1016/j.eneco.2023.107208)
Earl, P.E., Markey-Towler, B. and Coutts, K. (2022) “50 years ago: Duncan Ironmonger’s New commodities and consumer behaviour and its relationship with Lancaster’s ‘new approach’ to consumer behaviour.” History of Economics Review, 83(1): 40-67 (DOI: 10.1080/10370196.2022.2106704)
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J. (2017) “The macro-economic impact of Brexit: using the CBR macro-economic model of the UK economy (UKMOD).” Journal of Self-Governance and Management Economics, 6(2): 7-49 (DOI: 10.22381/JSME6220181)
Coutts K. and Rowthorn R. (2013) “The UK balance of payments: structure and prospects.” Oxford Review of Economic Policy, 29(2): 307-325 (DOI: 10.1093/oxrep/grt015)
Martin, B. and Rowthorn, R. (2013) “Can intangible investment explain the UK productivity puzzle? A response and comment.” National Institute Economic Review, 226: R42-R49
Martin, B. and Rowthorn, R. (2013) “A rejoinder to Goodridge, Haskel and Wallis.” National Institute Economic Review, 226: R54 (DOI: 10.1177/002795011322600107)
Book chapters
Gudgin, G., Coutts, K. and Martin, B. (2021) “Discrimination in housing.” In: Foster, J.W. and Smith, W.B. (eds.) The idea of the Union: Great Britain and Northern Ireland. Belcouver Press.
Gudgin, G., Coutts, K. and Martin, B. (2021) “The island economies: comparative living standards.” In: Foster, J.W. and Smith, W.B. (eds.) The idea of the Union: Great Britain and Northern Ireland. Belcouver Press.
Coutts, K. and Laskaridis, C. (2019) “Financial balances and the development of the Ethiopian Economy.” In: Cheru, F., Cramer, C. and Oqubay, A. (eds.) The Oxford handbook of the Ethiopian economy. Oxford University Press.
Gudgin, G. and Coutts, K. (2015) “Should the UK continue to follow liberal economic policies?” In: Green, J., Hay, C. and Taylor-Gooby, P. (eds.) The British growth crisis: the search for a new model. Palgrave Macmillan.
Special reports
Coutts, K. and Gudgin, G. (2015) The macroeconomic impact of liberal economic policies in the UK. CBR Special Report, April
Martin, B. and Rowthorn, R. (2012) Is the British economy supply constrained II? A renewed critique of productivity pessimism. CBR and UK~IRC Special Report, May
Martin, B. (2011) Is the British economy supply constrained? A critique of productivity pessimism. CBR and UK~IRC Special Report, July
Martin, B. (2010) Rebalancing the British economy: a strategic assessment. CBR and UK~IRC Special Report, April
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J. (2015) UK economy forecast report. CBR and Ulster University Special Report, November
Working papers
Martin, B. (2025) “How not to backcast time series data, or why Britain’s post-war national accounts could still lead you astray.” Centre for Business Research Working Papers, No.543. Cambridge: University of Cambridge..
Martin, B. (2024) “You really never had it so good, or why Britain’s post-war national accounts could lead you astray.” Centre for Business Research Working Papers, No.541. Cambridge: University of Cambridge.
Coutts, K., Gudgin, G. and Gibson, N. (2018) “How the economics profession got it wrong on Brexit.” Centre for Business Research Working Papers, No.493. Cambridge: University of Cambridge.
Martin, B. (2018) “A comment on Oulton, ‘The UK productivity puzzle: does Arthur Lewis hold the key?” Centre for Business Research Working Papers, No.498. Cambridge: University of Cambridge.
Gudgin, G., Coutts, K. and Gibson, N. (2016) “The macroeconomic impact of Brexit: using the CBR macroeconomic model of the UK economy.” Centre for Business Research Working Papers, No.483. Cambridge: University of Cambridge.
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J. (2017) “The role of gravity models in estimating the economic impact of Brexit.” Centre for Business Research Working Papers, No.490. Cambridge: University of Cambridge.
Coutts, K. and Gudgin, G. (2015) “The CBR macro-economic model of the UK economy (UKMOD).” Centre for Business Research Working Papers, No.472. Cambridge: University of Cambridge.
Rowthorn, R. and Coutts, K. (2013) “De-industrialisation and the balance of payments in advanced economies.” Future of Manufacturing Project: Evidence Papers, No.31. London: Foresight, Government Office for Science.
Coutts, K. and Rowthorn, R. (2013) “Update of prospects for the UK balance of payments.” Future of Manufacturing Project: Evidence Papers, No.30. London: Foresight, Government Office for Science.
Rowthorn, R. and Coutts, K. (2013) “Re-industrialisation – a commentary.” Future of Manufacturing Project: Evidence Papers, No.32. London: Foresight, Government Office for Science.
Martin, B. (2013) “Capital investment: what are the main long-term trends in relation to UK manufacturing businesses, and how do these compare internationally?” Future of Manufacturing Project: Evidence Papers, No.8. London: Foresight, Government Office for Science.
Conference/Workshop papers
Gudgin, G. (2017) “The economic impact of Brexit.” Conference on Legal and Economic Impact of Brexit, Peterhouse, University of Cambridge, 30 March 2017.
Gudgin, G. (2017) “The economic impact of Brexit.” Conference on the Impact of Brexit, University of Buckingham, 26 June 2017.
Gudgin, G. (2017) “Short-term forecasts for the UK economy in the context of Brexit.” Clash of the Titans conference, Royal Institution London, February 2017.
Gudgin, G. with Coutts, K. (2016) “Not the OBR: a macro-economic policy model of the UK economy with insights from Godley & Lavoie.” Post Keynesian Economics Study Group Annual Conference, Greenwich University, June 2016.
Gudgin, G. with Coutts, K. (2016) “A macro-economic policy model of the UK economy: a Brexit scenario.” Department of Economics Seminar Series, Kingston University, October 2016.
Gudgin, G and Gibson, N. (2015) gave a workshop on the UK macro-economic model at the Ulster University, 8 June 2015. This was attended by civil servants and business representatives in Northern Ireland.
Gudgin, G. (2014) Cambridgeshire County Council, East of England forecasting model: Spring 2014 – Forecasts and dwellings targets scenario.
This project organised by Oxford Economics Ltd provided forecasts, scenarios and advice for local authorities in the East of England co-ordinated by CCC.
Gudgin, G. (2014) Workshop on better use of evidence for policy-making. EU Commission Brussels, May 2014.
Gudgin, G. (2014) “The causes and consequences of the long expansion 1992-2007.” Clare College, University of Cambridge, September 2013.
Datasets
Coutts, K. and Gudgin, G. Macro-economic database for the UKMOD model of the UK economy updated using the 2023 Bluebook National Accounts and other official economic sources. Around 200 variables in total. An associated database of 350 financial stock and flow variables also created in preparation for the extension of the UKMOD to a full stock-flow consistent system.
Gudgin, G. The UK macro-economy database was extended and updated in line with the 2014 Blue Book. In conjunction with Neil Gibson and Jordan Buchanan at the Ulster University Economic Development Centre software was created to manage changes in national accounts data, associated re-estimation of equations and other management tasks connected with the UK macro-economy dataset and the UKMOD model.
Gudgin, Coutts, Martin. Two complete updates of the macro-economic datasets for the CBR Macro-economic model of the UK Economy. Work undertaken with colleagues in Ireland (Professor Neil Gibson and Jordan Buchanan). The UKMOD database is now compliant with the 2020 ONS National Accounts Blue Book, with further data for 2021 using ONS quarterly statistics. In addition a Financial variables dataset for the FInMOD model has been updated. A further update will be undertaken when the 2021 Blue Book is published in October 2022.
Gudgin, G. Two complete updates of the macro-economic datasets for the CBR Macro-economic model of the UK Economy. Work largely undertaken by colleagues at Ulster University (Professor Neil Gibson and Jordan Buchanan). The UKMOD database is now compliant with the 2016 ONS National Accounts Blue Book, with further data for 2016 using ONS quarterly statistics.
Gudgin, G. New large scale trade dataset compiled by Professor Neil Gibson and Jordan Buchanan to facilitate research on gravity models. Innovative software written by Professor Gibson allowed partial datasets to be constructed for specified dates, giving considerable flexibility.
Other publications
Gudgin, G. and Coutts, K. “Household debt, financial balance, and macroeconomic stability: an empirical stock-flow consistent model of the UK economy.” Submitted to Review of Income and Wealth.
Gudgin, G. and Coutts, K. “The economics profession routinely over-pessimistic on impact of Brexit on the UK economy.” Paper submitted to the NIESR Workshop on the impact of Brexit, 17 November 2023.
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J. (2017) Defying gravity: a critique of estimates of the economic impact of Brexit. London: Policy Exchange.
Tombs, R. and Gudgin, G. (2022) “Only an ‘un-conservative’ measure can solve the energy crisis.” The Spectator, 4 September 2022
Gudgin, G. (2022) The island of Ireland: two distinct economies. London: Policy Exchange.
Gudgin, G., Coutts, K. and Martin, B. (2022) Why the CER is wrong about Brexit. London: Policy Exchange.
Gudgin, G. (2022) “The protocol is not helping the Northern Ireland economy, as some economists say.” Belfast Newsletter, 23 June 2022
Gudgin, G. (2021) “This is a radical UK plan to overturn the protocol.” Belfast Newsletter, 28 July 2021
Media coverage
Gudgin, Coutts, Martin, Series of articles by Graham Gudgin on aspects of Brexit for the Centre for Brexit Studies
Gudgin, Coutts, Martin, Birmingham City University, Spiked, C and the BriefingsforBritain websites
Gudgin, G. Sunday Telegraph, Simon Heffer, “Impact of Brexit”.
Gudgin, G. London Evening Standard, Anthony Hilton, “Economic Impact of Brexit”.
Markou, C. The Independent, (Several occasions).
Gudgin, G. Coverage received on launch of Liberal Markets report in the Observer and Guardian newspapers
Gudgin, G. Took part in 30-minute discussion on Share radio, London, 14 September on Liberal Markets Report
MPhil students supervised
Gudgin, G. supervised Saite Lu (Sidney Sussex College) on the topic “Financial modelling in a stock-flow equilibrium context”.