Pieria View

It is fair to say that I would not have imagined myself writing a post in defence of the Office for Budget Responsibility. Nevertheless, here I find myself (sort of). That is not to say I intend to offer any excuses for the OBR’s worryingly poor forecasting record for UK economic output, which have been used all too frequently as a fig-leaf to cover a litany of equally poor policy decisions. Instead I want to defend Robert Chote and his team from a particular charge levelled at them by the FT’s Chris Giles last week. In an article entitled “ How to ‘plog’ the hole in our awful public finances ” Giles writes: “Had the OBR assumed significant spare capacity now alongside extremely weak growth in the economy’s potential output, it could combine a lacklustre forecast for output growth without the assumption that spare capacity would still exist in 2017-18. The benefit would be a logical and consistent forecast, but the assumptions would come at a cost: the OBR ...

In my latest feature " The price of safety ", co-written with Frances Coppola, we take a look at an issue I have been closely following over the past few years - the economic impact of corporate cash hoarding. To my mind the story is a crucial one to help explain why more than five years since the start of the financial crisis Western economies are still struggling to achieve meaningful growth. For me the key to understanding this point is an appreciation of sectoral balances. The concept was eloquently summarised by Martin Wolf in 2011 : "If the government wishes to cut its deficits, other sectors must save less. The questions are 'which ones' and 'how'. What the government has not admitted is that the only actors able to save less now are corporations." Since the onset of the crisis executives of cash-rich firms (along with a number of commentators) have argued that they have good reason to build up capital buffers. Macro threats such ...