- Anti-trust policy
A policy designed to promote competition and support ‘free’ markets, limiting the exercise of monopoly power by curtailing mergers and dispersing cartels.
Austerity is a discourse that emphasises that societies are ‘living beyond their means’. It is allied to austerian policies, which favour balanced budgets, tight fiscal discipline, and substantial reductions in public spending and welfare provision. While such policies are often portrayed simply as economic necessities they are underwritten by political concerns about (public and personal) fiscal rectitude and the size of the state.
- Bank disintermediation
A process whereby traditional banks are bypassed as facilitators of funding or investment in favour of market-based or peer-to-peer transactions.
- Bean, Charlie
Professor Sir Charlie BeanLink opens in a new window, was a BRC member of the OBR, 2017-2021.
Budget Resonsibility CommitteeLink opens in a new window (of the Office for Budget Responsibility)
Britain’s exit from the European Union
Central Bank Independence
Charter for Budget Responsibility
- Chote, Robert
Robert ChoteLink opens in a new window, Chairman of the OBR, 2010-2020.
Coordinated Market Economy
- Computable General Equilibrium (CGE) model
A linear and rather static economic model commonly used to derive the ultimate equilibrium of an economy. CGE models cannot capture an economy’s trajectory – how it moves between one state and another.
The Coronavirus Job Retention SchemeLink opens in a new window, otherwise known as furlough, was designed by the British government to provide stimulus payments to businesses to avoid mass lay-offs of workers during the height of the COVID-19 pandemic.
The Novel Coronavirus Pandemic
Centraal PlanbureauLink opens in a new window (the Netherlands Bureau of Economic Analysis)
Comparative Political Economy
- Cyclically adjusted fiscal rules
Targets for a country’s public finances that are sensitive to its position in the economic cycle. Cyclically adjusted fiscal rules are designed to improve upon the blunt instrument of Nominal fiscal rules, which can create suboptimal policy outcomes. Cyclically adjusted fiscal rules face their own challenges, however, particularly in accurately determining the shape of the economic cycle and the position of an economy within it.
- Cyclically adjusted public sector net borrowing (CAPNB)
The impact of the economic cycle on government borrowing modelled using measures of the output gap. When output is below potential, public borrowing is usually higher due to increased welfare expenditure and lower private spending and tax revenue.
- Deficit bias
The idea that a democratic government’s economic managers always prefer to promise increased public spending to electorates, but are loath to raise sufficient tax revenues to pay for it. This leads to higher budget deficits and government debt, leading to a deterioration in the public finances.
An attempt to distance macroeconomic policy from frontline partisan politics, often by placing it in the hands of ‘objective’ and ‘independent’ external expert institutions. Such depoliticising moves are always incomplete as there is always a politics of economic policy.
- Developmental state
A form of state in which a directive or strategic public authority prioritises intervention and investment in the domestic economy to improve trend growth or productivity and address deficiencies (for example in workforce skills and training provision).
- Doom loop
A negative spiral in which the significant liabilities of over-exposed banks translate, through bail outs, into increased public debt for governments that are already in a weak fiscal position.
Department for Work and Pensions
- Dynamic Stochastic General Equilibrium (DSGE) model
A quantitative abstraction of the macroeconomy, often founded on rational optimising agents, and frequently favoured in New Consensus Macroeconomics . The model’s linear assumptions about self-correcting markets have increasingly been called into question following the non-linear dynamics of the Global Financial Crisis and its legacy.
European Court of Justice
- Econometric techniques
Quantitative, mathematical and statistical methods of analysing economic data.
- Economic and Fiscal Outlook (EFO)
The Economic and Fiscal OutlookLink opens in a new window is produced twice a year by the OBR. It presents the OBR's medium-term economic Forecasting, covering the next five year period. It asseses if the government will be likely to meet its fiscal targets, such as Cyclically adjusted fiscal rules.
- Economists for Free Trade (EfFT)
Economists for Free TradeLink opens in a new window is a pro-Brexit pressure group previously known as Economists for Brexit. It is formed of Economists including Professor Patrick MinfordLink opens in a new window who advocate for global free trade in opposition to dominant understandings of trade flows - typically driven by a Gravity model - which suggest that Britain's primary trading relations will always be defined by their geographic position within Europe.
European Economic Community
A set of ‘innovative’ and ‘risk-taking’ attitudes and behaviours attributed to those engaged in new business ventures.
When an economy is assumed to return to its ‘normal’ or Equilibrium state.
What is perceived to be the ‘normal’ or Steady state functioning of an economy, associated with stable economic growth.
An assumption underlying many economic forecasts whereby the past is viewed as a reliable guide to the future.
Exchange Rate Mechanism
- European Research Group (ERG)
- Expansionary fiscal contraction
An idea central to Austerity, and associated with New Classical Macroeconomics. It argues that sharp reductions in public spending in the face of high debt levels can improve economic growth through the positive confidence effects this demonstration of fiscal discipline has on businesses and other economic actors. It favours public sector retrenchment in order to enable the (assumed to be more efficient) private sector to ‘pick up the slack’.
Foreign Direct Investment
- Finance-led Anglo-Liberal growth model
A form of economic growth attributed to archetypal liberal market economies – such as Britain – that is heavily reliant on debt-fuelled consumption, low wages, and flexible labour markets. Financial services (rather than traditional sources of growth, such as manufacturing), play an important role.
The weaving of financial sector practices into the fabric of a political economy, and the increasing encroachment of financial dynamics into all aspects of society, affecting the everyday life of citizens. This can reshape the wider model of capitalism, for example through prioritizing shareholder value within the financial system.
A macroeconomic policy area pertaining to the public finances – government spending and revenue.
- Fiscal consolidation
Efforts to restore the public finances, more often through spending cuts than tax rises. Attempts to restore ‘prudent’ public spending, allied to Austerity policies.
- Fiscal multiplier
A gauge of how fiscal policy affects output, used within economic modelling. Higher multiplier values indicate a significant beneficial effect of expansionary fiscal policy on economic activity.
- Fiscal Risks Report (FRR)
The Fiscal Risks ReportLink opens in a new window is produced by the OBR every two years. It assesses the medium-term risks for the public finances and suggests their potential long-term Fiscal sustainability impacts.
- Fiscal space
The ability of governments to engage in active or expansionary fiscal policy without damaging Fiscal sustainability, or undermining their access to borrowing on financial markets.
- Fiscal sustainability
The ability of governments to maintain public finances over the long-term, with a particular concern for the supportability of debt.
- Fiscal Sustainability Report (FSR)
The Fiscal Sustainability ReportLink opens in a new window is typically produced by the OBR every year. It provides long-term (50 year ahead) projections of the state of the public finances, including of debt sustainability. In recent times it has presented different fiscal scenarios that may be induced by the COVID-19 pandemic.
- Forecast Evaluation Report (FER)
The Forecast Evaluation ReportLink opens in a new window is produced by the OBR once a year. It compares the accuracy of the OBR's economic Forecasting to subsequent real-world data and suggests how future forecasts can be improved.
The use of economic models to construct possible future scenarios for an economy.
Impediments to free trade due to the imposition of tariffs or non-tariff barriers.
Free Trade Agreement
Gross Domestic Product
Global Financial Crisis
- Gravity model
The leading model of international trade, based on empirical regularities gleaned from decades of international trade statistics, that emphasises the importance of an economy’s size and its geographic proximity to trading partners in determining trade flows.
- Group of Twenty (G20)
The Group of TwentyLink opens in a new window is a multilateral economic forum through which the world's leading economies strive for global economic growth.
- Growth model
An abstraction of economic growth in a particular national context, used in comparative capitalisms scholarship, incorporating growth's demand drivers and broader institutional conditions, such as the degree of Financialisation. Examples include the post-war Fordist wage-led model, and the Finance-led Anglo-Liberal growth model.
- Hughes, Richard
Richard HughesLink opens in a new window, Chairman of the OBR, 2020-present.
An idea derived from New Keynesian economics, referring to a process whereby substantial persistence of higher unemployment leads to loss of skills, human capital degradation, and insider/outsider effects within the labour market. The enduring scarring effect on productive capacity leads to ratcheting up of the long-term unemployment rate, reducing the economy’s growth potential.
- Independent Fiscal Institution (IFI)
In the same way that independent central banks, like the Bank of EnglandLink opens in a new window, were designed to depoliticise monetary policy, Independent Fiscal Institutions have been created to try and remove the politics from fiscal policy. IFIs like Britain's OBR are charged with overseeing the government's stewardship of the public finances, measuring its progress against stated fiscal rules and Forecasting the economy's likely future path. Within the field of International Political Economy (IPE) scholars contest the idea of Depoliticisation, arguing that all economic policy - even when overseen by independent Technocratic economic governance institutions like the OBR - is subject to various forms of politics.
- Institute for Fiscal Studies (IFS)
The Institute for Fiscal StudiesLink opens in a new window provides independent microeconomic research and public policy analysis tackling areas including Britain's public finances and education policy.
- Institutie for Government (IfG)
The Institute for GovernmentLink opens in a new window is a cross-party think tank that provides research and analysis into the operations of the British government with the aims of educating the public and promoting more effective public administration.
- International Monetary Fund (IMF)
The International Monetary FundLink opens in a new window is a global organization designed to foster international economic cooperation.
- International Political Economy (IPE)
International Political Economy is an academic field that challenges the neutral and scientific claims of orthodox Economics to uncover how all economic theories, policies and practices are underwritten by particular political visions.
A body of macroeconomic thinking – named after economist John Maynard Keynes – that views the capitalist economy as inherently unstable, thus undermining the self-equilibrating market assumptions of classical approaches. Keynesianism posits a greater role for government intervention – notably, counter-cyclical fiscal policy and demand management –in stabilising the economy.
- King, Andrew
Liberal Market Economy
When a macroeconomic theory or model is underpinned by a focus on the activities of individual economic agents.
Memorandum of Understanding
Monetary Policy Committee
Non-Accelerating Inflation Rate of Unemployment
The National Institute of Social and Economic ResearchLink opens in a new window is an independent institute that conducts research into the impact of economic and social forces on everyday life in Britain. It particularly asks how policy can effect change.
National Economic Development Council
- Neo-classical economics (NCE)
A theory that remains the dominant orthodoxy on economic growth. In NCE, the free play of market forces is the optimum stimulant of growth, and any growth shortfalls are attributed to barriers or impediments to free markets. The state is largely absent from the NCE model. NCE assumptions – such as the idea of diminishing returns from investment or the assertion that markets will automatically tend towards equilibrium – are often not supported by persuasive empirical evidence.
- New Classical Macroeconomics
A theory that evolved in response to the Keynesian emphasis on market failure and demand management and recovered a central role for markets and the price mechanism. Government intervention in markets is viewed with suspicion and the economy is instead viewed as a self-equilibrating system comprised of rational, optimising individuals.
- New Consensus Macroeconomics
A fusion of New Classical and New Keynesian thinking that emphasises the importance of micro-foundations and rational expectations for understanding the macroeconomy, and assumes equilibrium and efficient markets. Monetary – rather than the traditional Keynesian fiscal – policy is viewed as the primary macroeconomic policy tool within this approach.
- New Keynesian Macroeconomics
A body of economic thinking focused on explaining microeconomic rigidities in capital and labour markets by employing a ‘watered down’ version of Keynesian approaches to market failure that centres information asymmetries, imperfect competition and externalities. Links with traditional Keynesian demand management philosophies persist through concepts such as hysteresis.
Non-Inflationary Continuous Expansion
- Nominal fiscal rules
Simple targets for the desirable level of public debt or deficit, often expressed as a percentage of an economy’s GDP. While nominal fiscal rules have the advantage of being transparent and easy to understand, they are insensitive to the economic cycle and can lead to potentially damaging policies, such as government spending cuts during a recession.
Organization for Economic Cooperation and Development
- Office for Budget Responsibility (OBR)
Office for National Statistics
- Output gap
The difference between an economy’s actual and Potential output. A measure of the spare capacity that macroeconomic policy has to work with that can have important implications for Fiscal policy settings.
- Paradox of neo-liberal democracy
Describes a perennial tension between national politics and global markets in advanced democracies amid complex interdependence: the rules, laws and institutions that sustain integrated global markets curtail national sovereignty. Put simply, as significant parts of economic governance transcend (exclusive) national control, governing in the political economic interests of one’s citizenry becomes more complicated.
Like Keynesianism, post-Keynesianism posits a central role for institutions and macroeconomic policy in stimulating growth. Post-Keynesianism claims to retain more of the spirit of original Keynesian analysis than New Keynesian Macroeconomics. Post-Keynesianism emphasises the importance of economic and political institutions in limiting uncertainty, orienting expectations, and delivering the confidence needed to trigger capital mobilisation.
- Post-neoclassical ‘new’ growth theory
An approach to growth developed since the 1980s that aims to correct some of the shortcomings of NCE by making growth endogenous – or internal – to the model. Here, capital investment triggers learning, which spills out from the firm and raises efficiency across the economy. New growth theory emphasises flexible labour markets, but also investment in infrastructure, training, and human capital formation.
- Potential output
An economy’s maximum productive capacity, usually measured in terms of real GDP.
- Privatised Keynesianism
A situation where the economy is boosted through individual – rather than public – debt.
Economic policies that exacerbate the cycle (for example cutting expenditure during a recession).
- Public sector net debt
The accumulated borrowings of a government.
Qualified Majority Voting
- Quantitative Easing
Large-scale pumping of money into the economy – a form of unconventional monetary policy used when traditional interest rate manipulation is unavailable as interest rates approach their Zero lower bound (ZLB).
- Rational expectations
The basic idea that forward-looking agents operating with full information can anticipate the future and adjust their behaviours accordingly.
- Regulation School
A French variant of Marxian political economy that centres the crisis prone nature of capitalism by comparing late 20th Century and early 21st Century varieties of capitalism. Economies are understood in terms of ‘regimes of accumulation’, the underlying economic structure; and ‘modes of regulation’, the political, economic and legal forms that class relations take in the political and institutional infrastructure developed to sustain capital accumulation and manage arising tensions.
How Economists talk about market imperfections which limit markets’ ability to ‘clear’ or function and allocate resources efficiently. For example, minimum wage regulations limit the ‘flexibility’ of labour markets.
- Schumpeterian growth theory
Schumpeterian growth theory – named after economist Joseph Schumpeter – centres the role of entrepreneurialism. It takes a long-term view of how to stimulate economic growth, advocating human capital investment to enhance skills and innovation. Incentives to innovate within large firms are also viewed as key sources of growth-boosting technological advancement.
- Secular stagnation
A political economic context referring to (very) slow economic growth, accompanied by persistent very low interest rates and low inflation. Explanations of secular stagnation can take demand and supply side forms, covering factors such as: a global savings glut; a chronic shortage of demand; a limited number of fresh, profitable investment opportunities; and a slowdown in technologically-induced productivity advances.
Single European Market
Scottish Fiscal Commission
A liberal vision for how the economy should be ordered that privileges competitive market mechanisms for delivering shareholder ‘value’ in the form of profit maximisation. This form of capitalism prioritises ‘exit’ – the ability of a firm to sell up and move on within ‘liquid’ capital markets.
Sudden disruptions to the ‘normal’ or ‘stable’ operation of the market economy. Often viewed as ‘exogenous’ to – that is, outside of or unexplained by – an economic model.
- Stability and Growth Pact (SGP)
A set of European Union rules designed to promote ‘healthy’ public finances and fiscal policy coordination across its Member States. SGP rules mandate the correction of ‘excessive’ national budget deficits and public debt burdens.
- Stakeholder capitalism
A more regulated vision of how the economy should be ordered that is more closely aligned with a coordinated market economy than shareholder capitalism is. Stakeholder capitalism privileges social goods, long-term and trust-based relationships, and ‘voice’ – the idea that a firm can be transformed from within through the articulation of interests and reform agendas.
- Steady state
An underpinning assumption of neo-classical economics whereby an economy is thought to always return to its ‘normal’ or equilibrium functioning, and deliver relatively stable economic growth.
The idea that the (adverse) economic effects of leaving a trading arrangement will mirror the (positive) effects accrued from joining it in the first place.
- Technocratic economic governance
The outsourcing of macroeconomic management to depoliticised expert institutions.
Treasury Select Committee
- Unconventional monetary policy
Non-standard forms of monetary intervention in the economy, such as Quantitative Easing. Used when traditional monetary policy has been constrained by interest rates hitting their Zero lower bound (ZLB).
- World Trade Organisation (WTO)
The World Trade OrganisationLink opens in a new window is an international organisation that governs trade rules between countries.
- Zero lower bound (ZLB)
Adjusting interest rates – the normal tool of macroeconomic stabilisation, cannot operate in a very low interest environment when the rate reaches zero. The ZLB constrains monetary policy, deterring central banks from boosting the economy by cutting interest rates further. This can have positive implications for fiscal policy’s suitability and efficacy as an economic stabilisation tool.