In this paper we model the role of open-economy effects within a New Keynesian Phillips Curve (NKPC) via the inclusion of intermediate imports in firms' production technology. Using this framework we provide evidence on two questions: first, does the inclusion of import prices help explain...

This paper investigates the extent to which changes in the quantity and cost of non-bank finance impact on the quantity and interest cost of UK-owned banks' corporate lending. The results give some support to the view that there is substitution between market finance and bank loans - loan growth...

In recent years there has been increasing interest in forecasting methods that utilise large data sets, driven partly by the recognition that policymaking institutions need to process large quantities of information. Factor analysis is a popular way of doing this. Forecast combination is...

The methodology used in papers by Darby and Ireland and Caporale and Williams is examined, to see whether it continues to explain UK consumption behaviour. First, Muellbauer and Murphy's proxy for financial liberalisation (FLIB) is updated. Then a forward-looking consumption model is...

Theory tells us that output, the capital stock and the user cost of capital are related. From the capital accumulation identity, it also follows that the capital stock and investment have a long-run proportional relationship. The dynamic structure thus implies a multi-cointegrating framework, in...

Conventional wisdom has it that Tobin’s Q cannot help explain aggregate investment. This is puzzling, as recent evidence suggests the closely related user cost approach can do so. We do not attempt to explain this puzzle. Instead, we take an entirely different approach, not using the...

We consider time series forecasting in the presence of ongoing structural change where both the time-series dependence and the nature of the structural change are unknown. Methods that downweight older data, such as rolling regressions, forecast averaging over different windows and exponentially...

Density forecast combinations are becoming increasingly popular as a means of improving forecast ‘accuracy’, as measured by a scoring rule. In this paper we generalise this literature by letting the combination weights follow more general schemes. Sieve estimation is used to optimise the...

Simple intertemporal consumption theory implies that non-durable consumption is a random walk, but that consumption cointegrates with income and wealth. By the Granger representation theorem, there must be a (vector) error correction mechanism ((V)ECM) representation of the data; but from the...

The appreciation of sterling that began in 1996 appeared to pass through into import prices very slowly, an apparent example of incomplete exchange rate pass-through. Incomplete pass-through has typically been explained by a combination of sticky prices and pricing to market. This can have...