Summary of Quarterly Bulletin
November 1997

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

Decomposing exchange rate movements according to the uncovered interest rate parity condition (96k)
(by Andy Brigden, Ben Martin and Chris Salmon of the Bank's Monetary Assessment and Strategy Division).
This article discusses the relationship between the exchange rate and monetary policy. It sets out some of the difficulties in identifying the underlying causes of exchange rate movements, and outlines one approach, based on the uncovered interest rate parity condition, that can be used to assess how far news about monetary policy has contributed to an exchange rate change.

The relationship between openness and growth in the United Kingdom: a summary of the Bank of England Openness and Growth Project (263k)
(by James Proudman and Stephen Redding of the Bank's Structural Economic Analysis Division).
This article summarises the results of the Bank's Openness and Growth Project. The empirical findings suggest that openness is closely associated with growth in productivity both across countries and across sectors within the United Kingdom. Between 1970 and 1992, some 15% of the initial gap in productivity between the United Kingdom and the United States was closed. Of this, roughly half was attributable to the rise in international openness.

Rationalisation of European equity and derivative exchanges (42k)
(by Claire Williamson of the Bank's Markets and Trading Systems Division).
This article outlines recent structural changes in EU equity and derivative markets, and some of the main factors underlying the increasing trading links between exchanges, both within countries and across borders. It concludes that such links are likely to continue to prove attractive, and notes that this raises a number of issues for market participants, exchanges and regulators.

Implied exchange rate correlations and market perceptions of European Monetary Union (185k)
(by Creon Butler and Neil Cooper of the Bank's Monetary Instruments and Markets Division).
A number of 'EMU calculators' have been developed to assess market expectations of the likelihood of particular countries joining European Monetary Union (EMU). Most of these techniques attempt to infer this information from interest rate differentials. Typically they also require assumptions about the level of interest rates that would hold should a country not join EMU. This article discusses an alternative measure of EMU convergence - the expected correlation between currencies implicit in foreign exchange options prices. It shows how implied correlations may be calculated, and how they may be used to gauge expectations of EMU participation by continental European countries and to interpret sterling's movements since mid 1996.

The Bank's regional Agencies (44k)
(by John Beverly, the Bank's Agent for the West Midlands).
In this article, John Beverly describes the role of the Bank's Agencies. He first sets out a brief history of the Bank's regional representation; the rest of the article outlines the present work of the Agencies within the new monetary policy framework.

The Bank's Centre for Central Banking Studies - an update (23k)
This article outlines the work and aims of the Centre, and its programme for 1998.