This article provides a brief review of issues relating to deflation. It explains what is meant by deflation, examines the historical experience and investigates what costs might be associated with deflationary episodes. It suggests that the adverse effects of deflation can be exaggerated by...

Over the past 20 years, the constant-price and current-price ratios of business investment to total output have behaved very differently. In this article we use a simple framework to examine how these two ratios should behave in long-run equilibrium. We investigate the conditions in which each...

This paper estimates UK capital adjustment costs, using a data set for 34 industries spanning the whole UK economy for the period 1970-2000. The results show that it is costly to install new capital, and that it has been more costly to adjust the level of non-ICT capital (plant, machinery,...

In aggregate models, costs that penalise changes in investment - investment adjustment costs - have been introduced to help account for a variety of business cycle and asset market phenomena. In this paper, we evaluate empirical evidence for these types of costs using US and UK industry data. We...

We develop a method of quantifying the uncertainty surrounding the estimates of the fundamental inflation implied by the New Keynesian Phillips Curve (NKPC). The uncertainty is represented as a band around the fundamental inflation, and encompasses the sampling uncertainty of both the estimates...

This paper introduces the Bank of England's new forecasting platform and provides examples of how it can be applied to practical forecasting problems. The platform consists of four components: COMPASS, a structural central organising model; a suite of models, used to fill in the gaps in the...