Summary of Quarterly Bulletin
Summer 2002

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.

No money, no inflation—the role of money in the economy (177k)
In this article, Mervyn King, Deputy Governor, examines the apparent contradiction that the acceptance of the idea inflation is a monetary phenomenon has been accompanied by the lack of references to money in the conduct of monetary policy during its most successful period. The disappearance of money from the models used by economists is, however, more apparent than real, with official interest rates playing the leading role as the instrument of policy, with money in the wings off-stage. Nevertheless, there are real dangers in relegating money to this behind-the-scenes role.

Asset prices and inflation (108k)
(by Roger Clews of the Bank's Monetary Instruments and Markets Division).
This article is one in a series on the UK monetary policy process. It discusses some of the interconnections between inflation, monetary policy and asset prices. The Monetary Policy Committee is extensively briefed on asset market developments, along with other developments in the economy, before it makes its policy decisions.

Durables and the recent strength of household spending (69k)
(by Robert Hamilton of the Bank's Structural Economic Analysis Division and Beverley Morris of the Bank's Inflation Report and Bulletin Division).
Household consumption in the United Kingdom grew by about 4% during 2001. This was largely accounted for by unusually strong spending on durable goods—growth in spending on other goods and services slowed to around a six-year low. This article discusses why spending on durable goods needs to be analysed differently from that on other types of goods, and provides some possible explanations for its recent unusual strength. In addition, an alternative estimate of consumption is presented that replaces the expenditure on durable goods with the flow of services derived from them. Over the past year, this alternative measure has grown less strongly than the standard consumer spending series.

Working time in the United Kingdom: evidence from the Labour Force Survey (126k)
(by Fergal Shortall of the Bank's Structural Economic Analysis Division).
This article examines the evolution of working time from a macroeconomic perspective using data from the Labour Force Survey. Average hours worked are still falling, after abstracting from the effects of overtime. This can largely be accounted for by the rise in the proportion of part-time workers. Above and beyond the full-time/part-time split, changes in employment composition by industry, gender, occupation, employment status and age explain little of the downward trend in average hours worked. Overtime has shifted from being paid towards being unpaid. Changes in the occupational mix can account for some of this shift. The article shows that paid overtime is the only component of hours with strong cyclicality. All other components lag GDP and in some cases lag employment too. This is consistent with aggregate changes in hours being the result of compositional effects, rather than employees in the same job changing their hours.

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.