Summary of Quarterly Bulletin
February 1997

Research work published by the Bank is intended to contribute to debate, and is not necessarily a statement of Bank policy.

Recent yield curve behaviour-an analysis (257k)
(by Bill Allen, Deputy Director, Monetary Analysis).
This article analyses recent fluctuations in ten-year interest rates in six countries using an estimation technique to decompose them into different maturity segments, and draws conclusions about the effects on ten-year yields of the changing state of the business cycle and of changing longer-term inflationary expectations

Increasingly weightless economies (55k)
(by Danny T Quah, Centre for Economic Performance, the London School of Economics).
This article is one of an occasional series provided by academics working outside the Bank of England. The views expressed reflect those of the author rather than those of the Bank of England. Danny T Quah examines how, when an economy grows, its patterns of production and consumption systematically change. He describes one such large-scale evolution, namely, the increasing weightlessness of aggregate output across advanced economies. In all fast-growing successful countries, growth in information technology has contributed positively both to increasing weightlessness and to economic growth. In the sample of countries studied here, the richer the country the higher the contribution to growth of information technology and services; in no country has manufacturing, as traditionally construed, continued to be as important.

Monetary policy implementation in EMU-a Bank of England perspective on the EMI's proposals (32k)
(by David Rule of the Bank's Gilt-Edged and Money Markets Division).
This article summarises and explains the European Monetary Institute's (EMI) proposed operational framework for the European System of Central Banks (ESCB) to conduct a single monetary policy in Stage 3 of Economic and Monetary Union (EMU). The framework would apply in the United Kingdom from 1 January 1999 if the United Kingdom fulfilled the necessary conditions to adopt the euro and the UK Government and Parliament decided to move to Stage 3. The article sets out the areas where agreement has been reached between EU central banks and gives the Bank of England's views on the issues that remain to be settled by the European Central Bank (ECB) after it becomes operational.

The gilt-edged market: developments in 1996 (128k)
The gilt-edged market development programme continued in 1996, and gilt repo trading concluded a successful first year. Ten-year gilt yields were little changed at year-end from the previous year, but the yield curve was flatter. Gilt sales raised nearly £40 billion in 1996, taking the value of gilt-edged stock outstanding to £285 billion. Further reforms to the issuance process contributed to strong auction results and rapid sales of tap stocks in 1996. The year concluded with the Bank's proposals to extend its daily money-market operations to operate in gilt repo and to abolish the requirement that the gilt-edged market-makers be separately capitalised entities.

New arrangements for issuing banknotes (10k)
(by John Bartlett, Head of Banking Services Division).
In March 1996, the Bank announced a major restructuring of its regional activity, which will result in the closure of four of its five regional branches. Simultaneously, the Bank announced an expansion of its industrial and economic liaison role in the regions: agencies will continue to operate from each city where branches are closing, as well as from three new locations. The Bank's branches have hitherto played an important role in issuing, sorting and receiving notes, and this article describes some consequential changes to these arrangements.

The financing of technology-based small firms (12k)
(by Adrian Piper and Melanie Lund of the Bank's Business Finance Division).
This article summarises the report published by the Bank of England on 28 October 1996, highlighting the main findings and outlining the Bank's recommendations.