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The Bank of England Macroeconomic Model: Its Nature and Implications


  • Philip Arestis
  • Malcolm Sawyer


The Bank of England’s report on its approach to macroeconomic modeling reveals the underlying structure of their macroeconomic model used for policy purposes. A simplified representation of the Bank of England model is presented, which is less disaggregated than the original model and focuses on the “long run” relationships. Following current econometric practice, the Bank of England generally estimates long-run steady-state relationships that have embedded short-run dynamics and error correction mechanisms. It is argued that the Bank of England has adopted an essentially endogenous view of money. The model is used to explore the effectiveness of the use of interest rates for the control of inflation and the implications of the macroeconomic model for monetary policy and its channels of influence throughout the economy.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2002. "The Bank of England Macroeconomic Model: Its Nature and Implications," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 24(4), pages 529-545, July.
  • Handle: RePEc:mes:postke:v:24:y:2002:i:4:p:529-545
    DOI: 10.1080/01603477.2002.11490342

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    References listed on IDEAS

    1. Buiter, Willem H, 1980. "Walras' Law and All That: Budget Constraints and Balance Sheet Constraints in Period Models and Continuous Time Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 1-16, February.
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    Cited by:

    1. Philip Arestis & Malcolm Sawyer, 2003. "Does the stock of money have any causal significance?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 113-136.
    2. Paul Downward & Andrew Mearman, 2008. "Decision-making at the Bank of England: a critical appraisal," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 385-409, July.

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