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Home > News and Publications > Summary of Quarterly Bulletin 2009 Q3

Summary of Quarterly Bulletin 2009 Q3

21 September 2009


Each article is available as a separate pdf file; click on the appropriate title to access the relevant file. Alternatively you may download the complete issue (4.6mb).

Recent economic and financial developments
Markets and operations (1.9mb)
This article reviews developments in global financial markets since the 2009 Q2 Quarterly Bulletin up to end-August 2009. The article also reviews the Bank's official operations.

Research and analysis
Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank or of MPC members.

Global imbalances and the financial crisis (902k)
By Mark Astley, Julia Giese, Michael Hume and Chris Kubelec of the Bank's Monetary Analysis Division.
The recent financial crisis has put the spotlight on the rapid rise in credit which preceded it and the macroeconomic context in which it developed. This article examines the contribution of international savings and investment imbalances to the crisis and how these imbalances have evolved since its onset, focusing on the UK experience as a deficit country over the past decade. It also briefly discusses some implications of the crisis for global imbalances over the medium term.

Household saving (716k)
By Stuart Berry and Richard Williams of the Bank's Structural Economic Analysis Division and Matthew Waldron of the Bank's Conjunctural Assessment and Projections Division.
Household decisions on whether to save or spend play a key role in the outlook for aggregate demand. A range of factors could help to explain the fall in the household saving ratio over the period 1995 to 2007. Declines in long-term real interest rates, looser credit conditions, rising asset values and greater macroeconomic stability are all likely to have reduced the incentive or the need to save. Lower household saving was also offset to some extent by higher corporate saving. Since 2007, the financial crisis and subsequent recession have unwound some of these factors and may continue to lead to a rise in household saving.

Interpreting recent movements in sterling (896k)
By Mark Astley and James Smith of the Bank's Monetary Instruments and Markets Division and Darren Pain of the Bank's Foreign Exchange Division.
The sterling effective exchange rate has depreciated significantly since the start of the financial market crisis in August 2007. Movements in sterling affect UK monetary policy via their potential impacts on CPI inflation prospects, where it is important to consider the reasons behind the change in the exchange rate. Sterling's movements potentially reflect a wide range of factors in the United Kingdom and overseas, in both the real economy and in financial markets. Indicative evidence suggests that sterling's depreciation reflected a combination of perceived changes to UK relative cyclical prospects, the perceived riskiness of UK assets and the apparent need for the UK economy to rebalance, the effects of which may have been amplified by financial market factors. But there is substantial uncertainty about the precise role of each factor.

What can be said about the rise and fall in oil prices? (756k)
By Victoria Saporta of the Bank's Prudential Policy Division, Matt Trott of the Bank's Conjunctural Assessment and Projections Division and Merxe Tudela of the Bank's International Economic Analysis Division.
The price of oil rose steadily between the middle of 2003 and the end of 2007, rose further and more rapidly until mid-2008 and fell sharply until the end of that year. Commentators agree that a significant part of the increase in the oil price over that period was due to rapid demand growth from emerging markets, but there are substantial differences of view about the relative importance of other factors, and limited work thus far in explaining the large fall in oil prices in the second half of 2008. The purpose of this article is to analyse the main explanations for the rise and fall in oil prices in the five years until the end of 2008. It argues that shocks to oil demand and supply, coupled with the institutional factors of the oil market, are qualitatively consistent with the direction of price movements, although the magnitude of the rise and subsequent fall during 2008 is more difficult to justify. The available empirical evidence suggests that financial flows into oil markets have not been an important factor over the period as a whole. Nonetheless, one cannot rule out the possibility that some part of the sharp rise and fall in the oil price in 2008 might have had some of the characteristics of an asset price bubble.

Bank of England Systemic Risk Survey (489k)
By Sarah Burls of the Bank's Risk Assessment Division.
Earlier this year, the Bank introduced a formal Systemic Risk Survey to supplement its regular dialogue with market participants. The survey is intended to elicit market participants' views about the prospects for financial stability in the United Kingdom. This article introduces the survey and reports the key results, following the summary published in the June 2009 Financial Stability Report.

Monetary Policy Roundtable (218k)
On 8 June, the Bank of England and the Centre for Economic Policy Research jointly hosted a Monetary Policy Roundtable. This was the second in a regular series intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. Participants included a range of economists from private sector financial institutions, academia and public sector bodies. There were four discussion topics: monetary policy and the current conjuncture; quantitative easing; sterling and capital flows; and lessons from monetary history for the current policy challenges. This report summarises the main points made by participants at the Roundtable.

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