Martin Ellison's picture
University of Oxford
Professor of economics

Voting history

Prospects for Economic Growth in the UK April 2014

Question 1

The long period of slow or negative growth might imply that there is a substantial output gap in the UK economy.  Do you agree that there is currently a larger output gap than the OBR estimate to the extent that the shortfall in output relative to capacity is 3% or greater?  

Confidence level:
Not confident
The somewhat sluggish downward adjustment of UK inflation suggests that the current output gap is not huge. However, recent monetary policy such as quantitative easing may well have caused shifts in the relationship between measured output gaps and (dis)inflationary pressure. It is difficult though to imagine that this justifies an output gap of 3% compared with what the OBR estimates.

Question 2

Do you agree that, in the wake of the financial crisis, any downward adjustment to the expected average annual long-term growth rate of the UK economy is likely to be by less than 0.25 percentage points?

Confidence level:
The average growth rate of real GDP in the UK has been stable and close to 2% p.a. since 1830. The average UK growth rate in the ten years after a recession has been less than 1.75% p.a. only once, which happened after the 1974 recession because of the recession that followed hot on the heels in 1975. If anything, the UK economy often appears to "bounce back" after a recession, with higher than average growth rates. For example, UK real GDP grew on average at 3.36% p.a. in the ten years after the end of the Great Depression.