The Coalition's Economic Strategy; Has it made a bad thing worse?

摘要

The source of the present recession in the UK and elsewhere was the world-wide financial crisis that followed a generalised collapse in inter-bank and bank lending to the private sector, which led to huge falls in spending and a collapse in output in most developed countries. By effectively ignoring this amplified credit effect, supply-side explanations place their emphasis instead on changes to the pattern of productivity shocks, downgrades in risk premia or shifts in aggregate production functions. Our review of some high profile examples of supply-side accounts suggests that the evidence is against them and a world-wide fall in aggregate demand seems a more likely explanation. Nonetheless, the supply-side view still appears to be the approach preferred by the Treasury suggesting, as it does, that present levels of slack in the economy are small.