Front Matter Page
© 2004 International Monetary Fund
March 2004
IMF Country Report No. 04/55
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 18, 2004. 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 Julio Escolano, Keiko Honjo, and Petya Koeva (all EUR)
Approved by European Department
February 18, 2004
Contents
I. Aging and the U.K. Pension System
A. Introduction
B. Features of the U.K. Pension System
C. Long-term Public Spending on Pensions: The Government’s Projections and Assumptions
D. Risks to the Long-term Public Pension Projections
E. The Government’s Strategy
F. Conclusions
Text Box
The Three Tiers of the U.K. Pension System
References
II. The Interest Rate Sensitivity of U.K. Demand How Different Is It From the Euro Area and the United States?
A. Introduction
B. Properties of the U.K., Euro Area, and U.S. Business Cycles
C. Comparison of Interest Rate Sensitivity
D. Housing and Consumption
E. Conclusion
Table
1. Cross-Correlations with GDP (1980:1-2003:1)
Figures
1. Impulse Responses: Base VAR Model with U.K. Output
2. Impulse Responses: Base VAR Model with Euro Output
3. Impulse Responses: Base VAR Model with U.S. Output
4. Selected Key Housing Sector Variables
5. Impulse Responses of the U.K. Consumption VAR
Appendix
Data Sources and Definitions
References
III. The June 2003 EMU Assessment
A. Introduction
B. An Analytical Framework
C. The Five Tests and the Twelve Issues
D. Conclusions: Seven Areas for Further Work
Text Boxes
1. Effects of EMU on Trade and Growth
2. Consumption and the Housing Market
3. Quantifying the Welfare Cost of Output Volatility
4. Is the United Kingdom Currently Affected by an Idiosyncratic Shock?
Figures
1. The Relative Return Curve
2. Private Consumption Contribution to GDP Growth
3. Relative Contribution of Private Consumption to GDP Growth
4. Real House Prices and Consumption per Capita
5. Correlation Coefficients between Private Consumption Growth and House Price Inflation, 1971-2001
6. UK: Real House Prices
Tables
1. Implied Effect of Joining EMU
2. Seleceted Housing Market Features
Appendices
I. The Option Value of Delaying EMU Entry
II. Domestic and Foreign Direct Investment (FDI)
Appendix Figure
A1. Ten-Year Benchmark Government Bond Yields
Appendix Tables
A1. Inward FDI Flows by Origin
A2. FDI Inflows into EU “Out” Countries
A3. FDI Inflows from Outside the EU
References