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Impact

We care about our research not only for the scientific impacts that it has but also for the way that it can influence policy and decisions of policy makers and for how it interests the public and improves their understanding of the way that the world works. Below are just some of the examples of where our research has had a real impact on policy.

Featured research impact summary

Macroeconomics, forecasting and real-time policy analysis

Macroeconomics, forecasting and real-time policy analysis

Macroeconomic models have an important role to play in helping decision-makers understand business cycles and recessions. Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped demonstrate how such models can help with forecasting and real-time policy analysis by presenting the likelihood of the entire range of possible outcomes.

The issue

Paul Samuelson, winner of the 1970 Nobel Prize for Economic Sciences, famously joked that "economists have correctly predicted nine of the last five recessions". The quip has earned plenty of airings in recent years – not least since the global financial crisis, which was widely unanticipated. So are forecasts derived from macroeconomic models really little better than intelligent guesswork, as some critics claim?

"Despite media scepticism, economic models can provide extremely valuable insights," says Kevin Lee, a Professor of Economics. "Strictly speaking, it’s right to say policymakers don't necessarily require them to discuss the direction an economy might be taking. They could simply theorise, for example. But economic models are essential if such discussions are to be raised to a level that's in any way evidence-based, scientific and systematic."

The research

A key aspect of CFCM's work in this field has been the fundamental recognition that policymakers want to know the likely outcome of their decisions. For this to happen they need models that can forecast the whole range of potential outcomes and the likelihood of specified events occurring. But decision-makers do not only need forecasts to be presented in a way in which they can be used: they also need forecasts to be based on reliable models that use all the relevant data available.

Professor Lee uses simple global vector-autoregressive (VAR) models that capture linear interdependencies between multiple time-series in different countries. The models draw on real-time datasets that include data both as it is first released and its subsequent revision alongside direct measures of expectations from surveys. This means forecasts can take into account global and national trends, any systematic patterns in data revisions and the effects of confidence and pessimism.

The impact

The macroeconomic data that policymakers need in order to make decisions is often available only with a lag. Alternatively, it might be made available reasonably contemporaneously but then later undergo considerable revision. CFCM's VAR modelling acknowledges that the analysis of real-time datasets – ie those that show data both as it was first released and as it was subsequently revised – is central to understanding the lessons of the past and, by extension, to informing the decisions of today.

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Research impact summaries

Modelling, mistakes and the search for “truth”

Modelling, mistakes and the search for "truth"

Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped show how macroeconomic models can help with forecasting and real-time policy analysis. In this Q&A Professor Kevin Lee explains how economic models have evolved in recent decades - and how the far-reaching value of "number-crunching" has earned greater appreciation in the wake of the global financial crisis.

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Lending rates: have banks been behaving badly?

Lending rates: have banks been behaving badly?

Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped shed new light on how banks set their lending rates for households and firms. The insights resulting from this work are proving especially valuable amid claims that rates have been kept higher than necessary in the wake of the financial crisis.

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Disability in the developing world

Disability in the developing world: tackling marginalisation

Research by the Centre for Research on Economics Development and International Trade (CREDIT) have demonstrated the benefits of providing orthotic equipment in developing countries. Dr Trudy Owens explains how a chance encounter led to the creation of a new charity to help the disabled in Uganda and an exciting research opportunity.

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Financial stability

Financial stability: where macroprudential and monetary policies meet

The Centre for Finance, Credit and Macroeconomics (CFCM) is helping to inform long-term policy making by disentangling the complex relationships between macroprudential policy and monetary interventions. Dr Margarita Rubio explains how this has worked to benefit policy making in developed and low-income countries alike.

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Transparency in the financial sector

Transparency in the financial sector: is it possible to have too much?

Studies by the Centre for Decision Research and Experimental Economics (CEDEX) have questioned the extent to which the financial sector might benefit from greater public scrutiny. Dr Dennie van Dolder explains how excessive scrutiny on financial professionals may lead to overcautious decisions that could ultimately harm our economic well-being.

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Financial protection: reforming the "villains of recession Britain"

Financial protection: reforming the "villains of recession Britain"

In tandem with his study for the Financial Conduct Authority, Dr Gathergood produced an influential report for ResPublica, a leading economic, social and cultural think-tank. He argued for the credit industry as a whole to remove the barriers to consumers searching for the best products available and recommended that all lenders, from payday to mainstream, move to a model in which clients struggling to repay their debts would be automatically referred to free and independent advice.

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Improving monetary policy

Improving monetary policy

Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped improve the design and implementation of central banks' monetary policies, including those of the Bank of England and the European Central Bank.

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Bringing the real world to policy decisions

Bringing the real world to policy decisions

The Centre for Decision Research and Experimental Economics (CeDEx) has helped government departments to devise and implement policies that better reflect the complexity and nuances of real-world behaviour.

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Changing the payday loan landscape

Changing the payday loan landscape

A major report by the School of Economics underpinned a landmark reform of the controversial payday loan sector.

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Driving trade policy reform in Africa

Driving trade policy reform in Africa

Studies by the Centre for Research on Economic Development and International Trade (CREDIT) have reshaped trade in Africa and informed the policy guidance provided by international agencies.

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Helping UK exporters

Helping UK exporters

Research by the Globalisation and Economic Policy Centre (GEP) has helped shape the UK's export policies by providing a better understanding of why firms choose to export and the barriers they face.

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