The Unassuming Economist

From a speech by Sarah Pritchard:

“Financial inclusion, enabled by innovation, unlocks economic opportunity.

I saw this in action myself when I visited a debt charity in Glasgow recently.

Staff told me how clients used to walk in carrying literal shopping bags of paperwork – bank statements, bills, scraps of paper with notes jotted on them.

You can imagine the time it took trying to piece it all together, not to mention how overwhelming it must have been for the clients themselves.

Well now, thanks to the power of open banking, that is a thing of the past. 

With just a few clicks, the charity can access a clear picture of a client’s finances.

Using faster and better-quality information to help them go from drowning in despair to a plan to decrease their debt. 

From struggling, to stability, to shaping their local economy. My visit showed me how innovation can kickstart a virtuous cycle that benefits everyone. 

Because unless people are financially resilient, with access to the products and services they need, they can’t contribute fully to our economy and its growth.

Strategy

So, I really welcome the Government’s proposals to develop a National Financial Inclusion Strategy. 

Particularly because we know that financial inclusion spans broad social issues from education to poverty to digital connectivity.

Areas where the Government can rightly lead a coordinated, coherent, and collaborative approach to this national challenge. 

And it’s a challenge we shouldn’t underestimate. 

Around 14 million adults in the UK have less than £100 in savings. That’s roughly 25% of UK adults vulnerable to even a small financial shock.

As regulators, we don’t have the direct tools to increase incomes and put more money in people’s pockets.

But through things like the Consumer Duty and our Innovation Hub, we do have levers that, in partnership with others, can make a difference.

And consumer resilience will be a key focus in our next 5-year strategy too, which we outlined on Tuesday.  

By enhancing market integrity, protecting consumers, and promoting competition in financial markets, we can ensure wider access, better quality and less costly products and services. 

And through our new secondary growth objective, we see further potential to support the increased investment, innovation and job creation that can boost financial inclusion.”

Continue reading here.

From a paper by Óscar Cabrera García and Carla Marrero Yanes:

“Arthur Okun, in 1962, established a relationship between unemployment and GDP after having
studied the behaviour of these variables in the US economy. To analyze the fulfillment of this
relationship in Spain, we used the specification of the model in differences, estimating it not only in
a static but also dynamic way for the national whole, as well as by sex and age groups. Our study
period is between 2003-2023. The results obtained suggest that the “Okun’s Law” is indeed fulfilled,
not only for the national whole but also for age groups and sex, although there are certain
differences in some groups, as well as depending on the type of analysis carried out.”

From a paper by Yadavindu Ajit and Taniya Ghosh:

“This study examines the effects of inflation targeting on inflation levels, its volatility, and its persistence
in emerging market economies. To better estimate the dynamic treatment effects of inflation targeting,
the study uses a larger set of data, including 59 emerging market economies, an extended sample
spanning 1985-2019, and a methodology that takes into account the staggered adoption of inflation
targeting by these economies. Traditional models used in the literature failed to account for staggered
adoption, resulting in biased estimates. Inflation targeting has been shown to significantly reduce
inflation levels in emerging markets, especially when hyperinflationary economies are excluded. Results
indicate significant reductions in inflation three to four years after adoption. In comparison, the findings
for inflation volatility and persistence are more nuanced. Standard models indicate initial volatility
reductions, but models that account for staggered adoption show no significant long-term impact.
Moreover, inflation targeting has no significant impact on inflation persistence, even in more stable
environments. These findings highlight the effectiveness of using models that account for staggered policy adoption when evaluating long-term policy impacts, and they suggest that, while inflation targeting is a viable tool for reducing inflation in emerging markets, its broader effects on inflation volatility and persistence have been limited.”

From The Scotsman:

“Watching Chancellor Rachel Reeves’ maiden Budget and Mansion House speech, one thing was clear – this is a UK government focused on long-term economic growth.

Reeves’ plan to “invest, invest, invest”, and the provision of Scotland’s largest financial settlement since devolution demonstrates a clear government mandate to drive growth and boost investment both into and from Scotland.

This is a vision shared by the investment management industry, which channels some £1.4 trillion into the UK economy on behalf of households across the country. Our industry has a long heritage in Scotland. Edinburgh remains the second largest centre of investment management in the UK, managing £490 billion in assets, and the Scottish investment management industry employs about 13,000 people. Much to be proud of.”

Continue reading here.

From a paper by Florian Huber, Massimiliano Marcellino, and Tommaso Tornese:

“We study the distributional implications of uncertainty shocks by developing a model that links macroeconomic aggregates to the US distribution of earnings and consumption. We find that: initially, the fraction of low-earning workers decreases, while the share of households reporting low consumption increases; at longer horizons, the fraction of low-income workers increases, but the consumption distribution reverts to its pre-shock shape. While the first phase reduces income inequality and increases consumption inequality, in the second stage income inequality rises, while the effects on consumption inequality dissipate. Finally, we introduce Functional Local Projections and show that they yield similar results.”