National Institute Economic Review

This chapter is in two parts. The first gives a general survey of developments in the British economy last year. It begins with a description of trends in output and demand; succeeding sections deal with fiscal policy, monetary policy and the exchange rate, inflation, unemployment and the balance of payments. It concludes with a post mortem on last year's forecasts. The second part of the chapter contains a short-term forecast for 1986 and 1987

UK national accounts statistics of government 'output' are based on inputs, especially employment; earlier UK conventions attempted to measure government output using statistics of activity (of the sort currently advocated in some quarters) but were dropped for reasons outlined below. The note provides some examples of revised activity-based 'output' measures and compares them with the old approach and with existing conventions. It concludes in favour of retaining existing conventions until more statistical research has been undertaken.

A fuller account of the issues, methodology and data summarised in this note is given in 'Measuring output and productivity in government' by M. S. Levitt and M. A. S. Joyce, NIESR Discussion Paper, no. 108.

The four papers which follow were written for a conference organised by the National Institute on 24 February. The papers draw on some of the major developments in macroeconomic research and policy appraisal at the Institute over the last two or three years. Particular emphasis is placed on the formation of expectations, on the behaviour of the exchange rate and on the labour market. The implications of this new work for our understand ing of fiscal expansion as a means of reducing unemployment are brought together in the final paper. The authors are all involved as researchers or consultants on the Institute's programme of macroeconomic modelbuilding and analysis, financed by the ESRC Consortium. They draw on the work of other members of staff, but responsibility for the papers rests with the authors individually and not with the editorial board. Appendix tables and references for all four papers are collected together at the end.