Monetary policy in a weak economy - speech by Martin Weale

In a speech delivered at the National Institute of Economic and Social Research, Martin Weale – External Member of the Monetary Policy Committee (MPC) – reviews the UK’s slow recovery from recession, in particular focusing on the unusual behaviour of productivity and consumption. He goes on to discuss what the Bank has been doing to support the economy before reviewing some of the other proposals that have been suggested.
Published on 25 November 2011

Martin Weale begins by reviewing historical data in an attempt to understand the UK’s difficulty in recovering from the recession which began in 2008. Weale suggests that there are only two factors which appear to help predict the length of time that output remains depressed following a recession: the current account and the occurrence of banking crises. But even accounting for these factors, Weale concludes that the UK’s recovery is unusually slow: “...at the outset of the recession output in the UK would have been expected to be depressed below its previous peak for only two years...the central path of the MPC’s latest forecast implies that it will probably take five and a half years for output to recover to its previous peak”.

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