Interest rates have been cut to a record low of 0.25% – essentially due to grim economic news from the short-run demand side shock of Brexit. Economic theory states that in normal circumstances, lower interest rates should boost aggregate demand (AD). To give a quick recap, lower interest rates should in theory: Reduce the incentive …
How to judge George Osborne’s and David Cameron’s economic record since May 2010? They inherited an economy recovering from a deep recession, high unemployment and large budget deficit. It was a difficult economic circumstance, but at the same time you might expect a strong economic recovery as there was much unused capacity and potential for …
Economic uncertainty refers to how firms and consumers are unsure about the future direction of the economy and usually react in a more conservative behaviour (i.e. less spending and investment) Economic uncertainty usually causes a lower rate of economic growth, until the uncertainty is resolved. UK economic uncertainty Measuring uncertainty There is no easy …
Readers question: Hello Tejvan! I wonder if you can explain if crimes have a net beneficial impact on the economy? Thank you! A nice change from Brexit problems. Does crime increase economic welfare? Let us suppose Tejvan buys a nice bicycle for £1,000 to commute into work. But, whilst locked up outside the office it …
There have been a couple of thoughtful pieces from Paul Krugman challenging the consensus that Brexit will have very high short-term economic cost. Krugman’s argument is: There is uncertainty, but uncertainty on itself is not enough to create a significant demand side shock. In fact, when the uncertainty is resolved, we could have a mini-boom …
The UK saw net migration of 330,000 in the last year. If net migration were to fall significantly – how would this affect the UK economy? Net migration is generally difficult to predict, but there are good reasons to assume this is likely to fall in future years. Net migration will likely fall because: Climate …
In economics, the framing effect states consumer choices will be influenced by how information is presented. One of the challenges of an economist is to find correct statistics and present them in a way which offers a meaningful and fair portrayal of the situation. Everyone has certain political bias and it can be tempting to …
If you are interested in fiscal impact of net migration, this study “Fiscal effects of immigration to the UK” is worth reading. The Economic Journal,Doi: 10.1111/ecoj.1218 Christian Dustmann and Tommaso Frattini Some highlights EU migrants cost the UK government £408.12 per second in public expenditures, and contribute £463.35 per second in revenue. Of all EU …