Project leaders
- Bill Martin
- Graham Gudgin
Project team
- Ken Coutts
- Graham Gudgin
- Bob Rowthorn
- Neil Gibson (Ulster)
Project status
Ongoing
Overview
Background
This work, which formed part of the macro component of the UK~IRC Business Services project, follows in the tradition of stock-flow modelling pioneered by the late Professor Wynne Godley. The research is not publicly funded. The modelling is used to inform strategic macroeconomic policy analysis of the UK economy. The work also provides a top-down perspective relevant and complementary to research on the balance of payments, led by Ken Coutts and Bob Rowthorn as part of the Services project. The project has produced numerous outputs since 2007 (see previous annual reports).
Macro-economic forecasting and policy analysis for the UK economy
The project involves a team based at the CBR and Northern Ireland. The CBR team consists of Ken Coutts, Graham Gudgin and Dr Saite Lu based in development studies and Sidney Sussex College. Colleagues in Northern Ireland are Professor Neil Gibson, Chief Economist for Ernst and Young Ireland and Jordan Buchanan is now Chief Economists at PropertyPal, Belfast. Professor Gibson and Mr Buchanan were formerly at the Ulster University Economic Research Centre where Dr Gudgin was Chairman. Both have elected to remain on the project in a voluntary capacity Dr Cam Bowie (no affiliation) is also member of the team with special reference to financial forecasting.
Limited work was undertaken on the project during the year August 2020-July 2021 partly due to difficulties in meeting in person during the coronavirus lockdowns and also because of the major disruption to normal economic activity and associated difficulties in official statistics on the UK and other major economies.
The end of the lockdowns towards the end of this period and the beginnings of a post-COVID-19 recovery in the UK economy have allowed us to begin work on the project once again towards the end of the period, in two areas:
- Maintenance and updating of the CBR macro-economic model of the UK economy (UKMOD). One round of data revision has been completed largely by our Ireland colleagues. This an autumn 2021 update incorporating the 2020 quarterly National Accounts data revisions. A final update incorporating 2020 national accounts will be completed when the 2021 Blue Book becomes available in October 2021. Both are major exercises which keep the databases relevant for the most up to date forecast and scenario work. With the revised data, a process of equation revision also took place, as part of a continuous process of model improvement.
- Work is planned on the major extension of the CBR 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’. Assisted by Dr Cam Bowie, we already have a working model and a database of financial assets and liabilities. Further work is planned to revise this model including the insertion of on a set of behavioral equations for the FINMOD system. We are discussing the possibility of financial support for this work with the FRIBUS institute at the University of Freiburg in Germany involving using the extend model in the generation of scenarios in connection with Universal Basic Incomes financed with Sovereign money.
Progress
Work during the year August 2021-July 2022 consisted of five main strands:
- Maintenance and updating of the CBR macro-economic model of the UK economy (UKMOD). Two rounds of data revision have been completed largely by our Ireland colleagues. These were an Autumn 2021 update incorporating the 2020 National Accounts Blue Book data revisions, and a Spring 2021 Provisional Update of 2019 data based on ONS Quarterly estimates and other revised data. Both are major exercises which keep the data-bases relevant for the most up to date forecast and scenario work. With the revised data, a process of equation revision also took place, as part of a continuous process of model improvement.
- We have not published a forecast report since the referendum in 2016. The uncertainties caused by the Brexit Referendum result and most recently the COVID-19 (coronoravirus) pandemic mean that short-term forecasts are dominated by somewhat arbitrary assumptions on business investment and household consumption initially around the impact of Brexit-related uncertainty and latterly on COVID. While Brexit-related uncertainties remain important, there is now three years post-referendum data to guide us what the economic impact of the uncertainties are likely to be. For COVID the uncertainties remain severe and it will not be until well into 2022 that we have enough data to assess the scale of the short-term economic impact
- Work has proceeded further on the major extension of the CBR 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’. Assisted by Dr Cam Bowie, we have a working model and a database of financial assets and liabilities. Further work is taking place on a set of behavioral equations for the FINMOD system.
- We have continued to evaluate the impact of Brexit in order to input assumptions on the potential long-term economic impact of Brexit.
- Graham Gudgin has been now a member of the Department of Trade Expert Modelling Group assessing the economic of trade agreements for the UK in 2021/22 and the knowledge and experience gained from this year-long engagement will assist in improving trade-modelling aspects of the CBR macro-economic model.
Output
Journal articles
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
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
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., 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”.