A2 Macro: Domestic and External Headwinds

As part of an introduction to a deeper analysis of economic cycles one of my A2 groups considered some of the domestic and external economic headwinds that will shape the next stage of the business cycle - not least the likely pattern of any recovery in activity. The aim of the exercise was to emphasise the importance of the inter-connected nature of modern economies. And also to reinforce the idea that policy decisions taken inside the UK economy can be blown off course by external shocks.

Here are some of the ideas

Domestic influences

Consumer expectations - about future changes in taxes, unemployment, house prices, real incomes
Business expectations - the state of confidence / pessimism about sales, costs, credit availability, cash-flow and profits
Scope for further monetary policy decisions - e.g. extension of quantitative easing, edge policy rates to zero
Fiscal policy changes - need to scale back borrowing, control G, likely sharp rise in the tax burden
Access to credit and the cost of borrowing - are the banks and other lenders sufficiently recapitalised to start lending?

External influences

Shape and strength of recovery in economies of our major trading partners
Ability of the global economy to coordinate a sustained recovery
Growing pressures for protectionism / economic nationalism
Volatile exchange rates
Volatile international commodity prices
Large swings in direction of foreign direct investment / international capital flows

It is really important for A2 macroeconomists to keep abreast of the news and develop a deeper awareness of what is happening and the mutliple inter-relationships between economic, financial and political forces. Are we in a substantially brighter position than six months ago? What causes turning points in cycles? The anniversary of the collapse of Lehman Bros is an opportune moment to take stock of where we are.

Some suggestions for reading

Telegraph: Too early to celebrate the end of the recession

Guardian: Recession is officially over, according to leading thinktank

The Times: House prices rise 0.8% to fuel rebound hopes

Economics Explained, by Evan [12 Feb 2012]
Martin Wolf on Global Shocks [10 Feb 2012]
Unit 2 Macro: Growth and Development - Some Indicators [30 Jan 2012]
Unit 4 Macro: Focus on India - Comparative Advantage [27 Jan 2012]
Unit 2 Macro: Focus on China - Trade and Growth [27 Jan 2012]
Unit 2 Macro: Focus on China - Inflation [26 Jan 2012]
Unit 4 Macro: Focus on India - Supply Side Issues [25 Jan 2012]
Unit 1 Micro: Can the UK Computer Games Industry Grow [24 Jan 2012]
Unit 4 Macro: Money, Debt and the New World Order [22 Jan 2012]
Unit 4 Macro: Russia Joins the WTO [22 Jan 2012]
Unit 2 Macro: Living below the Breadline [19 Jan 2012]
Unit 3 Micro: World’s Largest Solar Plant Opens [15 Jan 2012]
Unit 2 Macro: Frontier Markets - the New BRICS? [15 Jan 2012]
Beyond the Bike - The Importance of Remittances [15 Jan 2012]
Unit 4 Macro: Time to Re-Boot the British Economy [14 Jan 2012]
Unit 4 Macro: Economics of Fiscal Deficit Reduction [12 Jan 2012]
Unit 4 Macro: Competitive Advantage in Trade (Some Videos) [12 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Hopes and Fears 2012 [10 Jan 2012]
Unit 2 Macro: Quantitative Easing in the UK [8 Jan 2012]
Unit 2 Macro: A Jobs Boost for the US Economy [8 Jan 2012]
Unit 4 Macro: Natural Disasters and their Economic Impact [7 Jan 2012]
Unit 2 Macro: Revision Quiz on Economics of Unemployment [5 Jan 2012]
Unit 4 Macro: Video Resources on Unemployment [3 Jan 2012]
Unit 1 Micro: Video Clips on Negative Production Externalities [29 Dec 2011]
2012 - Carnage on the High Street [28 Dec 2011]
2011 in Review - The US Economy [27 Dec 2011]
Unit 2 Macro: The UK Housing Market in 2011 [26 Dec 2011]
Unit 2 Macro: Brazil Overtakes UK in Economic Size [26 Dec 2011]
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry [21 Dec 2011]
Economics of Deforestation [20 Dec 2011]
Economic Corruption - Global Rankings for 2011 [19 Dec 2011]
Unit 2 Macro: Mobile Phones and African Economic Growth [18 Dec 2011]
Unit 4 Macro: The Rise in Self Employment [17 Dec 2011]
Unit 3 Micro: Patent Wars- A Touchy Subject for Apple [16 Dec 2011]
Unit 2 Macro: Long Term Unemployment - A Human Story [15 Dec 2011]
Unit 4 Macro: Does UK Manufacturing have a Future? [30 Nov 2011]
Unit 2 Macro: Will a Youth Jobs Subsidy Work? [30 Nov 2011]
Unit 3 Micro: Brand Loyalty in Mobile Phones [27 Nov 2011]
Where is the UK Economy? National Output [22 Nov 2011]
UK unemployment in November 2011 - a video overview [22 Nov 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
Unit 2 Macro: A Prezi on Unemployment Policies [16 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Eurozone crisis - a selection of resources [12 Nov 2011]
Unit 4 Macro: America’s hour-glass economy [9 Nov 2011]
Unit 2 Macro: Video Clips on Unemployment [6 Nov 2011]
Unit 3 Micro: Unilever hit by rising costs [6 Nov 2011]
Unit 3 Micro: Impulses to Change Management Models [5 Nov 2011]
Unit 1 Micro: Costs and Benefits of a Super Sewer for London [1 Nov 2011]
Unit 1 Micro: Google Maps to Charge for Usage [31 Oct 2011]
Unit 4 Macro: Unemployment Chart Resource Download [29 Oct 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Unit 1 Micro: Is the Sun Dipping on Solar Subsidies? [27 Oct 2011]
Unit 3 Micro: Ofcom gives stamp of approval for flexible pricing in mail [21 Oct 2011]
Unit 2 Macro: A Widening Regional Divide in Life Expectancy [19 Oct 2011]
Unit 2 Macro: Economic Importance of Investment [19 Oct 2011]
Unit 3 Micro: Tesco Behaving Badly - Price Anchoring [17 Oct 2011]
Unit 2 Macro: Positive and Negative Multiplier Effects [14 Oct 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
UK Unemployment in October 2011 [12 Oct 2011]
Unit 4 Macro: Unit Labour Costs and Inflation [12 Oct 2011]
Skidelsky in Madrid [12 Oct 2011]
Unit 2 Macro: UK suffers a weak recovery [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
Unit 1 Micro: Producing Coffee - Kenya in Pictures [4 Oct 2011]
Unit 2 Macro: Homework Assignment on Consumer Spending [3 Oct 2011]
NMW: Classical real-wage unemployment [3 Oct 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Greek debt decision tree [25 Sep 2011]
Unit 4 Macro: Greek Economy at Default’s Door [25 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Unit 4 Macro: Bangladesh and Comparative Advantage in Textiles [19 Sep 2011]
Unit 3 Micro: Fixed and Variable Costs [18 Sep 2011]
Another Economics prop - for remembering MC=MR! [15 Sep 2011]
Public vs Private Sector - the world’s largest employers. [12 Sep 2011]
Unit 2 Macro: Income and Wealth in the UK [12 Sep 2011]
UK Macro: Risks of a Double Dip Recession [12 Sep 2011]
Unit 3 Micro: Short Run Costs of Production [6 Sep 2011]
NHS spending good, private provision bad? [5 Sep 2011]
Mixing with the Nobel Economists [4 Sep 2011]
Starter Activity: Health Economics [1 Sep 2011]
John Kay on the future of Economics [26 Aug 2011]
Unit 3 Micro: Quiz on Business Costs and Profits [25 Aug 2011]
Unit 4 Macro: GDP per person since the credit crunch [19 Aug 2011]
Unit 4 Macro: Savings and Banking to enhance Development [16 Aug 2011]
Monetary Policy Roundtable [25 Jul 2011]
“We need to make more stuff, using the same number of people…” [16 Jul 2011]
Unit 1 Micro: Cotton Prices and the Retail Price of Clothing [13 Jul 2011]
What might happen on August 2nd? [12 Jul 2011]
Unit 1 Micro: Economics of Volatile Corn Prices [12 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 2 Macro: Reducing Unemployment after a Recession [11 Jul 2011]
Unit 3 Micro: Oligopsony - Dairy Losses Drive Farmers from the Fields [10 Jul 2011]
Unit 1 Micro: High price of petrol drains demand [9 Jul 2011]
Where there’s muck there’s brass [6 Jul 2011]
UK firms wake up to Brazilian opportunities [21 Jun 2011]
AQA ECON4 Context [20 Jun 2011]

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