Front Matter Page
© 2003 International Monetary Fund
February 2003
IMF Country Report No. 03/47
United Kingdom: Selected Issues
This Selected Issues paper for the United Kingdom was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on February 12, 2003. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the United Kingdom or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
UNITED KINGDOM
Selected Issues
Prepared by a staff team consisting of Julio Escolano, Petya Koeva and Ivanna Vladkova Hollar (all EUI)
Approved by European I Department
February 12, 2003
Contents
Basic Data
I. An Analysis of House Prices in the United Kingdom
A. Introduction
B. Characteristics of the U.K. Housing Market
C. The Empirical Model
D. Concluding Remarks
References
Figures
1. House Prices and Structural Factors
2. Equilibrium and Actual Real House Prices in the United Kingdom
3a. Actual vs Predicted Changes in U.K. Real House Prices
3b. Residuals from Estimated VEC model of U.K. Real House Prices
4. Actual House Price Changes and Simulation of Model Dynamics, 2001–02
Table
1. House Price Model, Estimation Results, 1972:4-2001:3
Appendix Tables
1 Unit Root Tests, 1972:4-2001:3
2. Lag Order Selection Criteria
3. Cointegraton Rank Test
United Kingdom: Basic Data
Year-on-year change as of November 2003.
For example, fiscal balance data for 2002 refers to FY2002/03. The fiscal year begins in April. Debt stock data refers to the end of the fiscal year.
Includes 2.4 percentage points of GDP in 2000/01 corresponding to the auction proceeds of spectrum licenses.
Up to third quarter of 2002.
| Demographic and other data; | ||||
| Area | 94,247 square miles (244,100 sq. km.) | |||
| Population (mid-2001) | 60.2 million | |||
| Infant mortality (per 1,000 live births) | 6.1 | |||
| Doctors per 1,000 inhabitants | 0.5 | |||
| GDP per capita (2002) | SDR 19,927 | |||
| Composition of GDP in 2001, at current prices | In billions of Pounds | Distribution in Percent | ||
| Private consumption | 586.8 | 59.2 | ||
| Public consumption | 153.9 | 15.5 | ||
| Total investment (including stockbuilding) | 163.0 | 16.4 | ||
| Total domestic demand | 896.7 | 90.5 | ||
| Exports of goods and services | 287.7 | 29.0 | ||
| Imports of goods and services | 339.1 | 34.2 | ||
| GDP at market prices | 990.9 | 100 | ||
| Selected economic data | 2000 | 2001 | 2002 Est. |
2003 Proj. |
| Output and unemployment: | (Annual percentage change) | |||
| Real GDP (at market prices, average estimate) | 3.1 | 2.0 | 1.7 | 2.2 |
| Manufacturing production | 2.0 | -2.4 | 0.9 /1 | … |
| Unemployment (in percent of labor force) | 5.5 | 5.1 | 5.2 | 5.4 |
| Earnings and prices: | ||||
| Average earnings in manufacturing | 4.6 | 4.3 | 3.5 | 4.1 |
| Retail price index, excluding mortgage interest | 2.1 | 2.1 | 2.2 | 2.6 |
| Money and interest rates: | ||||
| M0 (end of period) | 4.3 | 8.3 | 5.1 | … |
| M4 (end of period) | 8.3 | 6.6 | 7.0 | … |
| 3-month Interbank rate | 6.1 | 5.0 | 4.0 | … |
| 10-year government bond yield | 4.8 | 5.0 | 4.4 | … |
| Fiscal accounts (In percent of GDP): 2/ | ||||
| General government balance | 4.0 3/ | 0.0 | -1.9 | -2.5 |
| Public sector balance | 4.0 3/ | 0.1 | -2.1 | -2.5 |
| Public sector net debt | 31.2 | 30.3 | 31.0 | 32.3 |
| (In billions of pounds sterling) | ||||
| Balance of payments: | ||||
| Current account balance | -19.2 | -16.4 | -18.0 | 23.0 |
| (In percent of GDP) | -2.0 | -1.7 | -1.8 | -2.2 |
| Trade balance | -18.5 | -22.3 | -17.8 | -22.2 |
| Exports | 265 | 268 | 269 | 279 |
| Imports | 284 | 290 | 287 | 301 |
| Direct investment (net) | -89.4 | -1.0 | -21.9 4/ | … |
| Portfolio investment (net) | 99.0 | 49.0 | 45.0 4/4/ | … |
| Reserve assets (US$ billion, eop) | 48.2 | 40.4 | 42.8 | … |
Year-on-year change as of November 2003.
For example, fiscal balance data for 2002 refers to FY2002/03. The fiscal year begins in April. Debt stock data refers to the end of the fiscal year.
Includes 2.4 percentage points of GDP in 2000/01 corresponding to the auction proceeds of spectrum licenses.
Up to third quarter of 2002.
| Demographic and other data; | ||||
| Area | 94,247 square miles (244,100 sq. km.) | |||
| Population (mid-2001) | 60.2 million | |||
| Infant mortality (per 1,000 live births) | 6.1 | |||
| Doctors per 1,000 inhabitants | 0.5 | |||
| GDP per capita (2002) | SDR 19,927 | |||
| Composition of GDP in 2001, at current prices | In billions of Pounds | Distribution in Percent | ||
| Private consumption | 586.8 | 59.2 | ||
| Public consumption | 153.9 | 15.5 | ||
| Total investment (including stockbuilding) | 163.0 | 16.4 | ||
| Total domestic demand | 896.7 | 90.5 | ||
| Exports of goods and services | 287.7 | 29.0 | ||
| Imports of goods and services | 339.1 | 34.2 | ||
| GDP at market prices | 990.9 | 100 | ||
| Selected economic data | 2000 | 2001 | 2002 Est. |
2003 Proj. |
| Output and unemployment: | (Annual percentage change) | |||
| Real GDP (at market prices, average estimate) | 3.1 | 2.0 | 1.7 | 2.2 |
| Manufacturing production | 2.0 | -2.4 | 0.9 /1 | … |
| Unemployment (in percent of labor force) | 5.5 | 5.1 | 5.2 | 5.4 |
| Earnings and prices: | ||||
| Average earnings in manufacturing | 4.6 | 4.3 | 3.5 | 4.1 |
| Retail price index, excluding mortgage interest | 2.1 | 2.1 | 2.2 | 2.6 |
| Money and interest rates: | ||||
| M0 (end of period) | 4.3 | 8.3 | 5.1 | … |
| M4 (end of period) | 8.3 | 6.6 | 7.0 | … |
| 3-month Interbank rate | 6.1 | 5.0 | 4.0 | … |
| 10-year government bond yield | 4.8 | 5.0 | 4.4 | … |
| Fiscal accounts (In percent of GDP): 2/ | ||||
| General government balance | 4.0 3/ | 0.0 | -1.9 | -2.5 |
| Public sector balance | 4.0 3/ | 0.1 | -2.1 | -2.5 |
| Public sector net debt | 31.2 | 30.3 | 31.0 | 32.3 |
| (In billions of pounds sterling) | ||||
| Balance of payments: | ||||
| Current account balance | -19.2 | -16.4 | -18.0 | 23.0 |
| (In percent of GDP) | -2.0 | -1.7 | -1.8 | -2.2 |
| Trade balance | -18.5 | -22.3 | -17.8 | -22.2 |
| Exports | 265 | 268 | 269 | 279 |
| Imports | 284 | 290 | 287 | 301 |
| Direct investment (net) | -89.4 | -1.0 | -21.9 4/ | … |
| Portfolio investment (net) | 99.0 | 49.0 | 45.0 4/4/ | … |
| Reserve assets (US$ billion, eop) | 48.2 | 40.4 | 42.8 | … |
Year-on-year change as of November 2003.
For example, fiscal balance data for 2002 refers to FY2002/03. The fiscal year begins in April. Debt stock data refers to the end of the fiscal year.
Includes 2.4 percentage points of GDP in 2000/01 corresponding to the auction proceeds of spectrum licenses.
Up to third quarter of 2002.
Contents
II. Cross-Country Overview of Growth Patterns 1970–2000
A. Introduction
B. The Output and Productivity Gaps
C. Some Growth Accounting
D. The Gap in TFP
E. The Gap in Capital Stock
F. Conclusions
References
Figures
1. GDP per Working-Age Person
2. GDP per Labor Unit
3. Average Hours Worked per Working-Age Person
4. Total Factor Productivity (TFP)
5. Capital per Unit of Labor
6. Capital-Output Ratios
Tables
1. Growth Accounting: International Comparison of Levels (I)
2. Growth Accounting: International Comparison of Levels (II)
3. Growth Accounting: International Comparison of Growth Rates (I)
4. Growth Accounting: International Comparison of Growth Rates (II)
5. Growth Accounting: International Comparison of Levels (I)
6. Growth Accounting: International Comparison of Levels (II)
7. Labor Productivity Gap and Its Components
8. Workforce Qualifications, 1998
III. U.K. Investment: Is There a Puzzle?
A. Introduction
B. Investment Trends: Decomposing the U K.’s Shortfall in Agregate Investment
C. What Explains the U.K.’s Relative Investment Performance?
D. Conclusions
Text Box
Box 1. Empirical Specifications
Appendix
Data Sources and Variable Construction
References
Figures
1. Aggregate Investment as a Share of GDP
2. Aggregate Investment Data: Two Available Decompositions
3. Components of Aggregate Investment: Decomposition 1
4. Components of Aggregate Investment: Decomposition 2
5. U.K. Investment-to-GDP Ratios: Actual and Fitted Values
Tables
1. Variable Definitions and Mean Values
2. Coefficient Estimates from Cross-Country Regressions
3. Coefficient Estimates from Panel Regressions