Economics CPD Courses in June 2014

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Siemens Boss on possible redindustrialisation of the UK economy

Sunday, July 20, 2014

This interview with Jurgen Maier of Siemens is well worth reading on several different levels. It challenges the conventional wisdom that UK will always lag behind Germany in terms of high value added manufacturing; it refers to the economics risks of Brexit (Britain leaving the EU) and it also stresses the importance to the UK of foreign investment from German businesses many of which have been in the Uk since well before the first World War - Siemens and Bosch are two well-known examples.

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Export Complexity - Hidalgo and Hausmann

Wednesday, July 09, 2014

Data on export patterns for goods from countries around the world provide a fascinating window on the degrees of complexity that nations have achieved. There is growing interest in the significance of knowledge capital or know-how in lifting productivity, competitiveness and improving trade performance for economies at different stages of development. Below is my selection of countries.

There then follows links to videos from Cesar Hidalgo and Riccardo Hausman on their theory of productive knowledge - and in particular how it is acquired at the level of the individual, the level of organizations, and cities, regions, countries and societies.

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RES Essay: Does immigrant labour benefit or impoverish the United Kingdom?

Sunday, June 15, 2014

Question six for the RES competition in 2014 is bound to produce a large number of answers. Labour migration is an important economic, social and political issue and many students will have clear views on the issue. So what will make an essay stand out from the crowd?

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The Laffer Curve and UK Corporation Tax

Wednesday, June 11, 2014

I was drawn to a Telegraph headline, Europe is jealous as Britain resurrects the Laffer Curve. According to the author, by next year Britain will have the equal lowest headline rate of corporation tax in the G20.

The Laffer Curve offers an intoxicating promise to politicians. It suggests that if the tax rate is too high (above t* in the diagram above) then a cut in tax rates will actually boost the amount of revenue raised!

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RES Essay: Should childcare costs be deductible against tax for working mothers?

Saturday, June 07, 2014

This is the second essay of six available for students researching an entry for the 2014 RES competition. There has been some discussion about the choice of phrase "working mothers" in the question. We will expect to see some students challenge this in their answer to broaden the discussion to "working parents" but any approach is fine as long as the economics is interesting, relevant, evidence-based and has a strong narrative running through it!

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The IMF on UK recovery, mortgage risks and the supply side

Students preparing for unit 4 on Tuesday might spend half an hour or so analysing this report of the IMF’s update on the UK economy. Here are some key points worth noting:

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ECB sets negative interest rates - what does this mean?

Friday, June 06, 2014

The European Central Bank implemented a negative interest rate policy yesterday. Whilst we have become very accustomed to a low base rate in the UK, the ECB policy seems extraordinary.

The policy has come about due to a continued concern over the economic situation in the Eurozone.  Growth remains weak, unemployment is high and inflation sits below the target of 2% in many of the 18 countries.  The ECB is unlikely to follow the UK (and others) strategy of quantitative easing and so is left with fewer choices.

By setting a negative interest rate, the ECB wants to discourage banks from keeping larger reserves and promote a greater level of lending (and thus stimulate economic growth).

If you want to download a short Powerpoint slideshow that explains the policy and its possible consequences then click on this link.

The link between unemployment and depression

Thursday, May 29, 2014

If you are like me, teaching unemployment starts with explanation of its causes and then moves on to its impact (before discussing possible solutions).  I've always found the 'impact' aspect relatively straight-forward; it would seem students find the concept of loss of output and its consequences fairly logical.  Discussing the long-term effects can be more difficult as young adults in full-time education may not be wholly empathetic towards the outcomes of job loss.

An interesting report came out from the Nuffield Trust recently (a copy is available from this link) about the increase in the prescription of antidepressants.  The increase from 15 million items prescribed in 1995 to 40 million items in 2012 is quite large but the report shows that the biggest jump has come during the economic downturn since 2008.  The report hypothesizes on a number of causes of this increase but does suggest a link between unemployment and the increase in prescription of antidepressants.  Perhaps it isn't a quantum leap to illustrate that there is a relationship between unemployment and depression but evidence of this nature may be valuable when making a point about the impact of unemployment (and its cost to society as a whole) in the class or as part of an exam answer.

Welfare benefits and job search - evidence from Norway

Wednesday, May 28, 2014

Unemployment benefits can address the failures of credit markets by enabling unemployed people to spend more time searching for a new job – even in countries like Norway, which have an equitable wealth distribution and a generous welfare state. That is the central conclusion of research by Christoph Basten, Andreas Fagereng and Kjetil Telle, published in the May 2014 issue of the Economic Journal.

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QE - New evidence of the impact on bond yields

New Bank of England research adds further weight to the view that central bank asset purchases (‘quantitative easing’ or QE) can affect government and corporate bond yields. In particular, the study, which is published in the May 2014 issue of the Economic Journal, finds evidence that QE works by reducing the supply of government bonds remaining in the private sector – what are known as ‘local supply effects’.

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Macroeconomics - Why has the UK recovered so fast?

Tuesday, May 20, 2014

Just in time for the unit 2 exam, and in good time for unit 4 students, this week's Deloitte Monday Briefing looks at the reasons behind the rapid recovery of growth in the UK. The Monday Briefing always makes very good reading, and often features analysis which is written with great clarity by Ian Stewart, their Chief Economist in the UK - to subscribe and receive an email every week, visit www.deloitte.co.uk/mondaybriefing

Below, I have copied much of this week's briefing with a little additional comment to emphasise the role of monetary and fiscal policies, and to look forward in order to consider how these may be evaluated in order to assess the contribution they may make in the near future.

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Unit 4 Macro: The New Pacific Alliance

Saturday, May 17, 2014

Here are some resources on the newly created Pacific Alliance which - in the short run - has achieved significant tariff  reductions but which in the long run seeks to create a new economic community / single market in the region.

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Unit 2 Macro: Should UK Interest Rates be Rising Now?

Friday, May 16, 2014

In remarks made when launching the new quarterly inflation report (May 2014), the Governor of the Bank of England, Mark Carney, has signaled that policy interest rates set by the MPC are likely to remain at historically low levels for some time to come. The first rise in rates is probably less than a year away and some economists have penciled in early New Year 2015 for a rate hike. But what are some of the arguments for raising interest rates now?

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Evaluating UK interest rates

Thursday, May 15, 2014

England's odds of winning the World Cup are about 30-1 - which reflects a rather low level of confidence that we have a realistic chance. However, the Governor of the Bank of England seems to think that a safer bet would be to back the recovery of the UK economy, judging by Mark Carney's launch of the latest Inflation Report yesterday. He likened the path the economy has to follow to that of England's task in Brazil, and said that the Bank's priority was to steer the economy through the opening rounds, all the way to victory. 

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What Ever Happened to the Phillips Curve

Tuesday, May 13, 2014

Teachers and students of the Phillips Curve will be delighted to access this updated classroom ready presentation on the Phillips Curve from Ed Dolan, Professor of Economics at Stockholm School of Economics, Riga, Latvia

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A Different View of World Trade: Why National Accounts Can Be Exciting

Thursday, May 08, 2014

Imagine that, for some reason, you were forced to choose between having to read a long, turgid novel like Westward Ho or Middlemarch, or a book on the methodology of the national economic accounts. Most people, however reluctantly, would plump for the former. But the latter can at times be very exciting. A recent paper uses national accounts concepts to revolutionise the conventional view of world trade.

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New ideas are needed in economics, but not the tired old statist ones

Friday, May 02, 2014

The annual Institute for New Economic Thinking (INET) conference was held in Toronto earlier this month. INET was created by George Soros in the autumn of 2009 in response to the economic crisis. Mainstream economics bears a heavy responsibility for creating the intellectual climate prior to the crash that the problems of boom and bust had been solved forever. New ideas were needed. Certainly, INET has funded lots of interesting projects which orthodox funding bodies would have rejected.

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UK Housing Industry: Turning Houses into Gold!

Thursday, May 01, 2014

Britain’s crisis of housing affordability is nothing to do with foreign speculators, according to Paul Cheshire writing in the Spring 2014 issue of CentrePiece magazine. Rather, it is a result of decades of misguided planning policies that constrain the supply of land and turn houses into something like gold or artworks. Houses have been converted from places in which to live into people’s most important financial asset.

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UK Economy: The Economics of Falling Real Wages

The prospects of significant wage increases for typical UK workers are bleak, according to Professors David Blanchflower and Stephen Machin writing in the Spring 2014 issue of CentrePiece magazine.

It is quite clear that the economy is still well below full employment and there is a large amount of slack in the labour market, they say. There is little evidence of widespread skill shortages, which would push up wages; and public sector pay freezes with continuing redundancies continue to push down on workers’ bargaining power.

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China about to overtake USA as world’s largest economy

New data suggests that China will soon overtake the United States with the largest GDP adjusted for purchasing power parity. This short Financial Times video from Chris Giles looks at the new data which are being driven by fresh estimates of what money can buy - i.e. the volume of goods and services that are produced in different countries and what one dollar can buy in one country compared to another. The data finds that poorer countries are cheaper than economists thought they were and richer countries are more expensive.

China barely breaks into the top one hundred of the countries of the world in terms of GDP per capita (PPP) - it is a large country but not rich!

The 2011 gross domestic product (GDP) of the European Union, the United States and China together accounted for half of the world GDP in 2011. In 2011, the GDP of the 28-nations EU represented 18.6 percent of the world's GDP, expressed in Purchasing Power Standards (PPP). It was followed by the United States with a share of 17.1 percent and China with 14.9 percent.

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Cost Benefit Analysis - The Crossrail Project

Sunday, April 27, 2014

Here is a streamed version of a revision presentation on the Crossrail project, a good example to use when teaching transport economics and the main principles and issues governing a cost benefit analysis approach to infrastructure investment appraisal. It is designed for use with AS and A2 economics students.

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Unit 4 Macro: TPP - A High Stakes Trade Deal

This is a screamer of an article on TPP from Linda Yueh. all students taking Econ4 must be aware of what the TPP is and what it might mean for the world economy if the TPP is finalised and completed. There are numerous barriers in the way. Can the USA and Japan resolve and reduce decades-long and deeply embedded protectionist measures covering farm products and car making? TPP has the potential to boost trade and growth in both countries - but politics and vested interests often get in the way. Watch Linda's video here: http://www.bbc.co.uk/news/business-27122428

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Unit 4 Macro: Global Ageing

Friday, April 25, 2014

This video from the Economist looks at some of the views on the economic and social impact of the ageing population in the world economy. 

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Supply-side growth, not inflation, is the cure to the debt overhang problem

Thursday, April 24, 2014

In the year to March 2014, consumer prices in Sweden fell by 0.4 per cent. This has prompted the central bank, the Riksbank, to abandon the normally cautious language used by such institutions. Over the same period, inflation was negative in a further seven European countries, such as Greece, Portugal and Spain. In eight other countries, inflation was still positive but very low, running at an annual rate of less than 0.5 per cent.

The Riksbank argues that these very low, often negative, rates of inflation are caused by a ‘very dramatic tightening’ of monetary policy. There is a definite risk of a slide into a prolonged depression similar to that of the 1930s.

Surely low inflation is a good thing? Well, up to a point.

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The World needs Infrastructure!

According to The Economist, much of the world faces a familiar supply side constraint: the need for massive investment in infrastructure.

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UK Economy: The Rise of Sterling

In recent months the external value of the pound has been rising quite strongly. Indeed it has outperformed a cluster of other countries even though we have seen a rise in the UK's current account deficit on the balance of payments. Stephanie Flanders, chief market strategist at JPMorgan Asset Management, talks to the Financial Times about the sterling's out-performance and what impact the strong pound is likely to have on the UK economy.

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UK Economy: Debt and Barriers to Growth

Wednesday, April 23, 2014

The BBC's Robert Peston looks at the broader issue of heavy debt in the UK economy and whether it is holding back economic growth.

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Unit 4 Macro: Prospects for UK growth - A New Survey

Monday, April 14, 2014

Fears that the financial crisis will have a significant negative impact on long-term UK economic growth are unfounded, according to a majority of the UK macroeconomics profession surveyed by the Centre for Macroeconomics (CFM). What’s more, the CFM survey indicates some optimism about the UK’s immediate capacity for higher growth: while roughly half of the respondents share the views of the Office of Budget Responsibility, the other half is substantially more optimistic about the capacity for the economy to recover.

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Unit 2 Macro: The Changing Face of East London

Saturday, April 12, 2014

This Financial Times video report looks at the economic transformation of East London prompted in part by high levels of inward investment from the Far East. Consider the economic benefits of this investment but also the challenges of rejuvenating a part of London which for decades has lagged behind the rest of the capital in nearly every economic and social metric,

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Economics in Crisis: Money, Blood and Revolution

Economics does not fit on a left-to-right political scale, says George Cooper, author of a new book 'Money, Blood and Revolution'. Cooper believes that Economics is in a scientific crisis with many competing schools of thought, all of which have some validity but which cause a log jam and contribute to policy confusions. 

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Unit 2 Macro: Conditions for a Sustainable Recovery

Friday, April 11, 2014

Here is an extract from a recent speech by Charlie Bean at the Bank of England - the full speech can be found here: www.bankofengland.co.uk/publications/Docume...

For the economic recovery to be both sustained and sustainable we really want to see three things happen

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Unit 4 Macro: Revision on Balance of Payments

Thursday, April 10, 2014

All exam boards require candidates to have an understanding of the Balance of Payments and Exchange Rates. In this session we will focus on the causes of the UK’s Balance of Trade (aka Current Account) deficit, what we can do about it, and how an exchange rate depreciation should affect an economy, and has affected the UK post financial crisis.

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Unit 2 Macro: Effectiveness of Macro Policies

We have considered the three key areas of macroeconomic policy – monetary policy, fiscal policy and supply-side policies.

In the longest essay questions on data response papers examiners often ask students to consider how effective these are when they are used to manage the economy. How can we judge whether the performance of the economy is improving as a result of them? In this session we will remember how to assess macroeconomic performance, think about some of the issues with measuring growth, and focus on ways to evaluate the effectiveness of different policies

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Unit 2 Macro: Revision on Managing the Economy

One of the most significant roles of a modern government is to ensure that the economy performs to its full capacity. The government has to consider the performance indicators like inflation, unemployment and economic growth and devise policies to achieve their aims. In this session we will consider the options that fall into the fiscal and monetary policy

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Unit 2 Macro: Revision on Unemployment

Unemployment is one of the major macro-economic performance indicators. The more unemployed people in our economy the more we are producing below our potential, less income is earned (reducing saving, consumption and tax revenue) and there is a negative impact on the welfare of society.

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State of the UK Economy - Threats to Recovery

Falling unemployment, declining inflation and stronger growth – we are seeing a better picture for the UK in 2014? But can it last?

After several years of weak expansion, the UK economy is enjoying a relatively strong cyclical recovery. Can the UK continued to experience a recovery in output, jobs and investment? Will the recovery be balanced and sustainable? How resilient is the UK? What are some of the major threats to growth in 2014 and beyond? This revision presentation hopefully provides some context.

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Unit 4 Macro: The Rise of Managed Exchange Rates

The new IMF report on the global economy published in April 2014 includes a focus on the currency regimes chosen by emerging market countries.  An increasing number of central banks have switched from free-floating exchange rates to managed currency regimes - perhaps because they want to make more active use of the exchange rate as an instrument of monetary policy. 

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Unit 4 Macro: Asian Growth Requires Less Inequality

The new annual report from the Asian Development Bank outlines what developing Asia needs to promote inclusive growth in the years ahead. Governments in the region should tackle widening inequality that is keeping millions poor, by using fiscal policy to help close income and wealth gaps and promote more inclusive growth, says the theme chapter of Asian Development Outlook 2014. The importance of equity in shaping future growth and development continues to gain momentum across the world and not just in the fast-growing Asian region.

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The changing face of Government Spending - a teacher resource

Wednesday, April 09, 2014

Here's a short but fun classroom starter to stimulate discussion about how the Government Spends its money.  

Based upon information from a BBC article showing how Government spending has changed since 1953, the resource asks students to separate 'blocks' representing the percentage of overall spending on each department (e.g. health, defense) into those that they think represent spending in 1953 and those that represent 2013.  Having separated the blocks, students must then re-arrange the blocks into perfect squares on the printable 'mats' provided as part of the resource.

As well as stimulating discussion about how the Government spends its money and changes in its priorities, it may provide a useful hook for getting your students to remember the proportion of spending the Government places on each of its department which they can use as evidence within their exam answers.

Click on this link to download the resource.

Click on this link to go to the original BBC article.

Unit 2 Macro: Supply Side Policies and Competitiveness

Tuesday, April 08, 2014

A revision presentation used at the workshop in Dubai on aspects of supply-side competitiveness in the UK economy

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Labour Market: UK Minimum Wage does not Cost Jobs

The introduction of a national minimum wage does not lead to job losses. That is the central finding of research by Peter Dolton and
Michael Stops, to be presented at the Royal Economic Society’s 2014 conference.

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Unit 4 Macro: African Exports to China - Benefits and Costs

Preferential market access to China is providing an important growth-enhancing outlet for African exporters that find it difficult to break into industrialised countries’ markets. But there remain dangers that current export structures and national capacity constraints may further entrap Africa given its comparative advantage in primary resources and China’s comparative advantage in manufacturing products.

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Unit 2 Macro: Fiscal Policy to improve Net Trade

Here is a good applied example of how fiscal policy can be used to help improve the UK's net trade position. Export finance is often a problem especially for small and medium sized businesses looking to expand beyond the domestic economy to new export markets. Improving the trade position is a key aspect of re-balancing the economy and make the recovery more sustainable.

Read: www.gov.uk/government/organisations/uk-exp...

Unit 4 Macro: Fixed Currencies and Crisis Recovery

Thursday, April 03, 2014

The nominal exchange rate is a key adjustment tool to help countries avoid traumatic balance of payments crises. And when a country is in a crisis, external adjustment is delayed and more difficult under a pegged exchange rate regime. These are the central findings of research by Atish Ghosh and colleagues, to be presented at the Royal Economic Society’s 2014 annual conference.

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Unit 4 Macro: Economic Benefits of EU Membership

Membership of the European Union (EU) has had a big positive effect on average incomes in all but one of its member countries. That is the central finding of research by Nauro Campos, Fabrizio Coricelli and Luigi Moretti, to be presented at the Royal Economic Society’s 2014 annual conference. They also find that the more financially developed countries have grown significantly faster after joining the EU.

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Financing the current account deficit

Wednesday, April 02, 2014

More on the implications of the UK’s massive current account deficit. Geoff has put together almost everything you need on the topic here, and he points out that the main implication is a net leakage from the circular flow of income, reducing AD and weakening multiplier effects.

A current account deficit is not necessarily a disaster; after all, imports are good too, sustaining our standard of living and is partly a reflection of the demand for intermediate goods our economy needs to stay efficient.

I’m going to pick up on the the statement that there is nothing wrong with a trade deficit. It simply means that a country must rely on foreign direct investment or borrowed money to make up the difference.

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Unit 2 Macro: Falling Inflation in the UK Economy

Monday, March 31, 2014

The UK’s official inflation benchmark, the Consumer Prices Index, slid to 1.7 per cent in February – the lowest for more than four years. What are some of the main factors causing inflation to fall below target?

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Unit 2 Macro: Network Rail plans £38bn Investment Programme

A significant 5 year rail infrastructure investment plan adds weight to the belief that capital spending will be a major driver of the next phase of the UK economic recovery. Network Rail is state owned, a not-for-profit business whose commercial returns are reinvested into the rail network.

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Unit 2 Macro: The UK Current Account Deficit

Sunday, March 30, 2014

Britain’s current account deficit for 2013 as a whole (4.4% of GDP) was greater than in any other developed economy and the widening current account gap is raising fresh concerns about whether the UK's economic recovery is balanced and sustainable.

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What’s happening to Chinese growth figures?

Friday, March 28, 2014

In a rather low key report on the BBC website this week, I found the shock news that China had a trade deficit of $23bn in February. This is alongside the HSBC Purchasing Managers' Index (PMI) which focuses on small privately owned businesses, and which gave a reading of 48.1 for March, compared to 48.5 in February - with any figure below 50 indicating a contraction in activity. 

And today there is a forecast of the 'official' PMI, which looks at the larger state-owned factories; although this is slightly over the 'expansion' measure of 50, it is only predicted to come in at 50.3 - and is subject to a 0.3 downwards correction to allow for seasonal patterns, according to Louis Kuijs, chief China economist at the Royal Bank of Scotland.

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