The Phillips Curve

The Phillips Curve

The Phillips Curve, perhaps the most distinguished curve in Economics, highlights the relationship between inflation and unemployment. As unemployment decreases, inflation increases. However, is it time to say farewell? 

A New Housing Bubble?

A New Housing Bubble? 

The 'Help to Buy' scheme has been extended, giving Londoners a 40pc government loan when buying a new-build property. However, it can be argued that this would cause a new housing bubble. Is there a better way to increase the supply of housing? 

China’s one-two-child policy

China’s one-two-child policy

China is expected to revise its barbaric one child-policy, implementing a more ‘lenient’ two-child policy in March of next year. But what provoked this reversal in policy and will it achieve its aims?

Nudge in the School Environment

Nudge in the School Environment

Thaler and Sunstein popularised 'Nudge', the idea that our behaviour can be changed with no cost, simply changing how choices are framed, in order to increase our wellbeing. The Behavioural Insights Team, (also known as the 'Nudge Unit'), has successfully introduced several measures into our society which have increased tax revenue for the government. We all can try to introduce 'nudges' in our own workplaces in order to ensure that customers make the best choice for themselves, and even society as a whole. 

The detrimental, global impact of China’s slowdown

The detrimental, global impact of China’s slowdown  

Over the past decade, China’s annual GDP growth has averaged at just under 10pc, but recent figures show that this trend has been broken. In the last quarter, China’s reported growth has been 7pc and Western Economists suspect that growth has been much lower and set to decrease further. China’s demand for commodities has decreased as she shifts her economy to consumption, away from investment, thus depressing global prices. Earlier this year, the Yuan devalued, resulting in further decrease in global demand and so repercussions in the global economy.

The Death of the Zero Lower Bound: Negative Nominal Interest Rates

The Death of the Zero Lower Bound: Negative Nominal Interest Rates

It is believed that Mario Draghi will cut the ECB’s deposit rate even lower, and will increase the Eurozone’s Quantitative Easing programme, in order to increase aggregate demand in the Eurozone. Meanwhile, the Fed is set to increase interest rates. It seems that the two largest economies are pursuing diverging policies. However, of particular interest is that Draghi seems to have broken the zero lower bound ‘rule’.

Mark Carney Raising Interest Rates: “Oh no he isn’t” “Oh yes he is”

Mark Carney Raising Interest Rates: “Oh no he isn’t” “Oh yes he is”

As pantomime season approaches, and with Christmas round the corner, inflation should increase as Santa fervently embarks on his annual shopping spree for the children of Britain. However, in both September and October inflation was -0.1pc, and on closer inspection it is hard to imagine that it would increase substantially before Christmas. Thus, it seems that the Bank of England will not raise rates this year.

December 2015: the month the Federal Reserve raises interest rates?

December 2015: the month the Federal Reserve raises interest rates?

Many feel that the Federal Reserve will raise rates this December, resulting in the first rise since 2006. Indeed, Federal Reserve Chairwoman Janet Yellen stated that a rise in interest rates was a “live possibility”.

Quantitative Easing

Quantitative Easing

Loosening monetary policy could be said to help countries move out of a recession. Usually, the Central Bank would lower interest rates in order to stimulate consumer spending, as consumers would then have a greater incentive to borrow more money, and a disincentive to save their money. However, when nominal interest rates are almost at 0, and domestic demand fails to increase, unconventional measures may need to be used, in order to pull the economy out of the liquidity trap. In the wake of the recent Financial Crisis, the Bank of England’s unconventional weapon of choice was Quantitative Easing. This was instigated in order to increase liquidity and reduce long term interest rates, and so stimulate consumer spending because, as Mervyn King stated at the time, interest rates and fiscal stimulus did not increase consumer demand. Indeed, monetary policy would be much easier and quicker to implement than a fiscal stimulus. Did Quantitative Easing help the Bank meet its 2pc inflation target? Did it help reduce the impact of the financial crisis?

Goodbye to Britain’s steel industry?

Goodbye to Britain’s steel industry?

Britain’s steel industry seems to be in steep decline as evidenced by the recent announcement by Tata Steel that 1 200 will face job losses in Scunthorpe and Lanarkshire. Thailand’s SSI also recently announced that 2 200 will lose their jobs as a recent on the closure of its Redcar works. However, these effects are expected to ‘ripple’ through the economy, as other sectors such as scrap metal dealers, metal traders and steel processors are expected to face job losses as a result of these closures.

Oil and exchange rates

Oil and exchange rates

Due to the falling price of oil, net oil-exporting countries, such as Norway and Russia, have seen their currencies depreciate over the past year. The Russian rouble has seen a 45pc decline against the dollar since June 2014, whilst the Brazilian real has declined by 40pc. 

To tax or not to tax, that is the question.

To tax or not to tax, that is the question.

David Cameron is facing increased demand from Jamie Oliver and his supporters to levy a ‘sugar tax’ on sugary drinks. Public Health England also released their report last week, outlining their aims for reducing obesity, and a sugar tax was among one of the top measures to be highlighted.

But, from an economic standpoint, is this a viable policy?

Airlines and Oligopoly Theory

Airlines and Oligopoly Theory

In an oligopolistic market the industry is concentrated in the hands of a few firms, and the actions of each firm is interdependent. This means that should one firm decrease prices, it is likely that they would increase sales at the expense of other firms. Unlike in a perfectly competitive market, the product is likely to be differentiated, and not homogenous. Moreover, it is likely that there are high barriers to entry in the market. This is because, if there were lower barriers to entry, then other firms would enter the industry, attracted by the abnormal profits, and so would reduce the market share for the dominating firms. There is strong debate as to whether the airline industry is an oligopolistic market- indeed, it does appear that it is. 

“Oil’s well” “Oil’s not so well”

Oil prices and the global economy: “Oil’s well”  “Oil’s not so well”

Oil prices have decreased dramatically over the past year. The US has increased fracking, extracting oil from shale reserves and thus increasing the global supply of oil. This has been compounded by the fact that Saudi Arabia has refused to cut back on oil production, hoping that the higher prices of oil would force out the US’ shale industry, thus increasing her own market share. Meanwhile, there has been decreasing demand from China as her economy experiences a ‘slowdown’ and shifts from manufacturing to the service sector. As China is the largest importer of crude oil this has dampened global demand. Both of these factors have driven the price of Brent crude oil to below $50 a barrel this month. The effects of such a decrease in the price of oil on the economy will depend on whether the low prices are sustained in the future. If prices remain at $50 a barrel, then net oil importing countries, such as the UK, can stand to benefit from the decrease, whereas net oil exporting countries could lose.

Osborne’s Budget: Tax Credits

Osborne’s Budget: Tax Credits

In his Emergency Budget, Osborne unveiled his most controversial policy to date: Tax Credits. However, the question remains: will a cut in Tax Credits increase incentives for workers to gain further employment? 

Osborne’s Budget: The National Living Wage

Osborne’s Budget: The National Living Wage

Osborne’s Emergency Budget has called for the implementation of a National Living Wage. This would increase wages from the current rate of £6.50 an hour, up to £7.20 by April 2016, and then further increasing to £9 by 2020. Those on the Minimum Wage would stand to see their salaries increase by an estimated £4 000 p.a. Furthermore, 2.5 million employees are expected to see their salaries increase by £5 000 by 2020 as a result of this National Living Wage.

The Double Irish Dutch Sandwich

The Double Irish Dutch Sandwich

FaceBook paid just £4 327 in Corporation Tax last year, whilst Starbucks has only paid £8.56 bn in Corporation Tax since 1998, when it started trading in the UK. However, interestingly, their methods may have been perfectly legal. The mechanism: the 'Double Irish and Dutch Sandwich'.

Osborne's Budget: The Case for Lower Corporation Tax Rates

Osborne's Budget: The Case for Lower Corporation Tax Rates

Osborne’s proposal to cut the corporation tax from 20pc to 18pc by 2020 should help to encourage businesses to invest in Britain. The tax rate has seen a steady decrease from its level of 28pc in 2013.

Tourism To The Rescue?

Tourism To The Rescue?

With the recent decline in the price of commodities, Emerging Markets are trying to increase and maintain their growth levels through other mediums. Tourism could help them on their mission. Indeed, whereas in 1990 the number of visitors in Sub-Saharan Africa was just over 6 million, in 2010 this increased to over 30 million by 2010, highlighting how tourism can play a large part in increasing aggregate demand in these developing nations.

Mobile Phones promoting growth for Africa!

Mobile Phones promoting growth for Africa!

With so many young people procrastinating on Twitter, Instagram and YouTube, the claim that mobile phones could help to promote growth in Africa seems highly implausible. If anything, people would be distracted, much like the youth of developed nations today, and growth could in fact decline!

Many in Africa are excluded from accessing banks. This is mainly due to the fact that banks are located in towns and cities, yet most of Africa’s population live in rural areas. A lack of adequate infrastructure hinders the movement of these peoples to cities to take out loans and start saving. Indeed, this is compounded by a high incidence of financial illiteracy. Moreover, there is the further disincentive of using financial institutions because the minimum deposit in most areas is 50pc of per capita GDP, and so the very poor are excluded from using these facilities.

U B E R ’s Price Surging Tactics

U B E R ’s Price Surging Tactics

Picture the scene. You are in central London on New Years Eve, anxious to get home as fast as possible. “Who ya gonna call?” Uber! However, there are many other party dwellers around you requesting an Uber, but there just aren’t enough drivers around. When demand exceeds supply, Uber’s ‘price surge’ meter is turned on. Suddenly, you find your fare being doubled, maybe even tripled. Typical isn’t it? Just when you want a taxi, Uber exploits the situation. Unfair, isn’t it? Not as much as you may think…

Beware The Dutch Disease

Beware The Dutch Disease

“This isn’t a medical blog!”, I hear you proclaim. Indeed, it isn’t, but the Dutch Disease isn’t a medical issue either. Granted, there is much debate among Economists as to whether the Dutch Disease is even a disease, a topic that I shall address in a future post. Coined by The Economist in 1977 to explain the decline in the manufacturing sector in the Netherlands due to the discovery of natural gas reserves in 1959, the Disease describes the relationship between the abundance of a primary commodity and the corresponding decline in other sectors in the economy. So what is this Disease? How do countries catch it? Can we prevent it?

“We’re off to see the Wizard, the wonderful Wizard of Oz”

“We’re off to see the Wizard, the wonderful Wizard of Oz”

Unbeknown to most of us, L Frank Baum’s “The Wizard of Oz” is based on the Depression of the 1890s in America. Whilst many may argue that this is a stretch of the imagination, the context in which the book was written, as well as the parallels between the book and the Gold Standard debate of the time, is uncanny.

Giffen’s Paradox

Giffen’s Paradox

The Law of Demand is firmly engrained in the minds of economists: ‘As the price of a good increases, the quantity demanded decreases’. However, like every good rule, there is an exception. In this case: Giffen Goods.

Europe and the Common Agricultural Policy

Europe and the Common Agricultural Policy

The CAP was introduced in 1962 in order to ensure that EU farmers were protected against low prices. The EU agreed to establish a minimum intervention price, meaning that should the price of agricultural produce fall below this level governments would buy farmers’ crops. Recent reforms have changed the nature of intervention, meaning that governments now subsidise farmers according to the size of their farms, rather than the number of crops that they grow. However, the economic case favours the dismantling of the CAP.   

Productivity Puzzle

The Productivity Puzzle 

A recent OECD report has revealed that Britain’s real GDP growth is stronger than the OECD’s average, with unemployment also only 6pc. This has all helped to increase business and consumer confidence. However, since the ‘Great Recession’, the UK has failed to increase its productivity, with the productivity gap compared with other G7 economies increasing, and it is currently at its largest since 1992. On the other hand, the USA’s productivity is 9pc higher than its pre-crisis levels and France too has increased its productivity by 2pc since 2008.

The Popcorn Quandary

The Popcorn Quandary

With the release of Bond’s new film ‘Spectre’ the other night, my friends and I decided to pay a visit to the cinema. Whilst we waited in the queue to get to our sofas, I couldn’t help but hear someone uttering that, “Popcorn is so expensive as soon as you step through the glass doors into ‘Everyman’!” (or any other cinema for that matter). As a keen Economist I wanted to get to the bottom of this age-old issue.