Quarterly Bulletin
External Issues Articles
| 2006 Q3 | The UK international investment position |
| Winter 2004 | The external
balance sheet of the United Kingdom: recent developments 
(107k)(by John Elliott and Erica Wong Min of the Bank's Monetary and Financial Statistics Division). The United Kingdom's external balance sheet currently records assets and liabilities of more than £3.5 trillion. Both sides of the external balance sheet grew sharply during 2003, continuing the marked expansion that has been recorded since the early 1990s. This article examines recent trends within the balance sheet components with reference to the associated financial flows and income. There is a particular focus on data reported by monetary financial institutions. The article discusses some of the problems involved in compiling an external balance sheet, examining two key issues through the estimation of a breakdown of revaluations to outstanding stocks and a discussion of foreign direct investment data. We also report on current domestic and international initiatives aimed at further improving the quality of external statistics. |
| Winter 2003 | Financial
stability and the United Kingdom's external balance sheet
(170k) (by Mhairi Burnett of the Bank's Monetary and Financial Statistics Division and Mark Manning of the Bank's Domestic Finance Division). This article, one in an annual series, examines the United Kingdom's financial transactions with the rest of the world, paying particular attention to the implications for financial stability. In recent years, the United Kingdom's stocks of external assets and liabilities have increased considerably, and each now exceeds £3.5 trillion. This is three times UK GDP and around a third of the United Kingdom's total financial assets. The monetary financial institutions (MFI) sector accounts for approximately half of the external balance sheet, reflecting both the international orientation of UK-owned banks and the cross-border activities of foreign-owned UK-resident banks. The article begins with a conceptual discussion of how external positions might affect financial stability, before turning to recent developments. The principal focus is on the MFI and private non-financial corporate (PNFC) sectors, in which the largest external positions exist. The discussion draws upon data from a variety of sources, including the Pink Book, sectoral financial balance sheets, the Bank of England and the IMF. |
| Summer 2003 | What
caused the rise in the UK terms of trade?
(123k) (by Karen Dury and Laura Piscitelli of the Bank's International Economic Analysis Division, Maria Sebastia-Barriel of the Bank's Structural Economic Analysis Division and Tony Yates of the Bank's Monetary Assessment and Strategy Division). The UK terms of trade rose by 15% from 1995 Q3 to 2003 Q1. This article looks at alternative explanations of why this happened, and what they mean for the likelihood that the terms of trade increase will endure. |
| Winter 2002 | The external
balance sheet of the United Kingdom: recent developments
(98k) (by Robert Westwood of the Bank's Monetary and Financial Statistics Division and John Young of the Bank's Domestic Finance Division). The external balance sheet (or international investment position) gives the most complete picture of the stock position of a country in its financial transactions with the rest of the world. The very breadth of coverage of the data leads inevitably to problems of measurement and valuation. Nevertheless, subject to certain qualifications, the data can throw some light on macroeconomic and financial stability issues related to the United Kingdom's cross-border financial links. This article, one in an annual series, discusses the recent evolution of the United Kingdom's external balance sheet, reviewing along the way some of the main methodological issues that impinge on an interpretation of the data. It concludes that, despite a persistent current account deficit, the balance of probability is that the United Kingdom still has net external assets, or at least the capacity to generate net investment income from overseas. There are also some grounds for optimism that the structure of its assets and liabilities has left the United Kingdom in a fairly strong position to withstand financial shocks. |
| Summer 2002 | Why are
UK imports so cyclical?
(72k) (by Valerie Herzberg, Maria Sebastia-Barriel and Simon Whitaker of the Bank's Structural Economic Analysis Division). The recent economic slowdown in the United Kingdom has been characterised by declines in business investment and exports. The impact on domestic output has been alleviated by robust household spending, but also by a sharp decline in imports of goods and services. This article shows that these divergent trends in the components of demand, and differences in their import content, can help explain the weakness in imports during 2001. More generally, close attention to the relative contribution of the components to aggregate demand can help explain fluctuations in imports. The analysis has been aided by the recent publication of updated information from the ONS on the import content of different expenditure categories. |
| Spring 2002 | Equity
wealth and consumption-the experience of Germany, France and
Italy in an international context
(108k) (by Ben Norman, Maria Sebastia-Barriel and Olaf Weeken of the Bank's International Economic Analysis Division). Consumption in Germany, France and Italy (the EU3) has generally been thought to be less responsive to wealth effects than in the United Kingdom or the United States. The aim of this article is to assess the evidence for changes in the responsiveness of EU3 consumption to changes in equity prices, given the rapid increase in share prices in recent years and the rising share of financial assets held in equities during the 1990s. |
| Winter 2001 | The external
balance sheet of the United Kingdom: implications for financial
stability?
(188k) In 2000, UK gross external assets and liabilities grew by more than 20%, boosted particularly by international mergers and acquisitions and international banking activity. In net terms, UK external liabilities fell moderately but remained substantial, at about 13% of annual GDP. This fall was associated with changing nominal values of UK external assets: the currency denomination of UK external assets and liabilities means that, other things being equal, a lower exchange rate reduces UK net external liabilities via revaluation changes. As reported in last year's article in this annual series, the UK net liability position may be misleading: UK net external assets are probably underestimated because of the way foreign direct investment is calculated. Policy-makers in the international community have focused on identifying key tools that could be useful for monitoring and analysing external balance sheet vulnerabilities. The second section of this article looks at the extent to which the United Kingdom can compile and assess the IMF's set of key indicators of external vulnerability. |
| Summer 2001 | Has there
been a structural improvement in US productivity?
(85k) (By Stuart Berry of the Bank's International Economic Analysis Division and David England of the Bank's Monetary Assessment and Strategy Division). Annual labour productivity growth in the United States has averaged 2.8% a year since 1996, compared with an average rate of 1.6% during the preceding 25 years. This marked increase in productivity growth has been a key component of what many commentators have suggested is a 'new economy'. Given the US slowdown since the second half of 2000, a key question is the extent to which these gains reflect structural improvements, rather than cyclical factors. The evidence so far points towards a large role for structural improvements in productivity. If these gains prove to be more cyclical, however, this would have important implications for corporate performance, financial markets and, ultimately, output and inflation. |
| November 1999 | The
external balance sheet of the United Kingdom: recent developments
The article describes how financial flows and changing asset values affect the United Kingdom's external balance sheet. It relates investment income flows and capital gains to stocks of assets and liabilities, and compares the United Kingdom's international investment position with those of other major economies. A box gives details of the UK participation in the IMF-sponsored coordinated portfolio investment survey. |
