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Development of a Stock-flow Consistent UK Macroeconomic Model for Policy Analysis


This work, which formed part of the macro component of the UK~IRC Business Services project, follows in the tradition of stock-flow modelling pioneered by the late Professor Wynne Godley. The research is not publicly funded. The modelling is used to inform strategic macroeconomic policy analysis of the UK economy. The work also provides a top-down perspective relevant and complementary to research on the balance of payments, led by Ken Coutts and Bob Rowthorn as part of the Services project. The project has produced numerous outputs since 2007 (see previous annual reports).

Macro-Economic Forecasting and Policy Analysis for the UK Economy

The project involves a team based at the CBR and Northern Ireland. The CBR team consists of Ken Coutts, Graham Gudgin and Dr Saite Lu based in development studies and Sydney Sussex College. Colleagues in Northern Ireland are Professor Neil Gibson, Chief Economist for Ernst and Young Ireland and Jordan Buchanan is now Chief Economists at PropertyPal, Belfast. Professor Gibson and Mr Buchanan were formerly at the Ulster University Economic Research Centre where Dr Gudgin was Chairman. Both have elected to remain on the project in a voluntary capacity Dr Cam Bowie (no affiliation) is also member of the team with special reference to financial forecasting.

Limited work was undertaken on the project during the year August 2020-July 2021 partly due to difficulties in meeting in person during the coronavirus lockdowns and also because of the major disruption to normal economic activity and associated difficulties in official statistics on the UK and other major economies.

The end of the lockdowns towards the end of this period and the beginnings of a post-COVID-19 recovery in the UK economy have allowed us to begin work on the project once again towards the end of the period, in two areas:

  1. Maintenance and updating of the CBR macro-economic model of the UK economy (UKMOD). One round of data revision has been completed largely by our Ireland colleagues. This an autumn 2021 update incorporating the 2020 quarterly National Accounts data revisions. A final update incorporating 2020 national accounts will be completed when the 2021 Blue Book becomes available in October 2021. Both are major exercises which keep the databases relevant for the most up to date forecast and scenario work. With the revised data, a process of equation revision also took place, as part of a continuous process of model improvement.
  2. Work is planned on the major extension of the CBR model to include a financial module (FINMOD) with a range of assets and liabilities for each sector. When completed this will make the model into a full-developed stock-flow consistent system along the lines laid out in Godley and Lavoie’s ‘Monetary Economics’. Assisted by Dr Cam Bowie, we already have a working model and a database of financial assets and liabilities. Further work is planned to revise this model including the insertion of on a set of behavioral equations for the FINMOD system. We are discussing the possibility of financial support for this work with the FRIBUS institute at the University of Freiburg in Germany involving using the extend model in the generation of scenarios in connection with Universal Basic Incomes financed with Sovereign money.


Work during the year August 2020-July 2021 consisted of three main strands:

  1. Bill Martin’s research is self-financed and his output peer reviewed and published by CBR. Bill’s purely macro-modelling work ended in 2011; it was taken over by CBR colleagues Dr Coutts and Dr Gudgin, who report separately. Bill’s work on the UK productivity puzzle continued until 2013 (a note published by NIESR) and restarted in 2017-2018. Collaboration with Mr Oulton (LSE) and Professor Rowthorn led to the publication of “A Comment on Oulton, ‘The UK Productivity Puzzle: Does Arthur Lewis hold the key?’”, CBR Working Paper No. 498, March 2018. The comment continued the thesis explored in two CBR Special Reports: “Is the British Economy Supply Constrained? A Critique of Productivity Pessimism” (2011) and “Is the British Economy Supply Constrained II? A Critique of Productivity Pessimism” (2012), a report co-authored with Professor Rowthorn.
  2. Bill’s June 2019 CBR Working Paper No. 514, “Resurrecting the UK sector national accounts after 1945”, updated his 2009 Note, “Resurrecting the UK Historic Sector National Accounts”, Review of Income and Wealth, Series 55, No. 3, 737-751 and extended the analysis to reconstruct national sector accounts data for the household and corporate sectors from 1946 to 1986: data no longer published by the Office for National Statistics (ONS). This attempt involved the backcasting of pension saving before 1963 and of major components of the household and corporate capital account before 1987.
  3. Bill’s June 2020 CBR Working Paper No. 519, “Resurrecting the UK corporate sector accounts”, extends and refines the data presented in his 2019 Working Paper. Using what is believed to be a novel method, the 2020 paper resurrects national accounts corporate sector data before 1987, distinguishing between the sectors comprising private non-financial corporations (PNFC), on the one hand, and financial corporations, which include some state-controlled enterprises, on the other hand. The resurrected PNFC dataset runs in detail from 1960. A much more limited set of reconstructed data is available for financial corporations. The resurrected data include the savings – broadly speaking, the “retained profits” – and the financial balances – the difference between retained profits and capital spending – of both corporate sectors. A number of robustness tests provides reassurance that the differently derived historic data for sectoral saving make sense. The combination of the 2019 and 2020 WP methods has allowed improvements to be made to the resurrected household sector series that begin in 1946.

Bill drew upon this body of work to collaborate with Professors Sefton and Weale who have begun a project to produce a post-war full set of national accounts under the aegis of the Economic Statistics Centre of Excellence (ESCOE). He presented his work at a meeting organised by the ONS in July 2021. A refined project scope document is now being drawn up.

Subject to the resolution of outstanding problems with official national accounts data, notably for gross fixed capital formation before 1960, and additional scrutiny and comment, it is the intention to make the complete resurrected sectoral dataset publicly available.

Journal articles

Gudgin, G. Coutts, K. Gibson, N and Buchanan, J. (2017) “The macro-economic impact of Brexit: using the CBR macro-economic model of the UK economy (UKMOD)” Journal of Self-Governance and Management Economics, forthcoming, 2017.

Gudgin, G., Coutts, K., Gibson, N., Buchanan, J. (2017) “Defying gravity: a critique of estimates of the economic impact of Brexit” Policy Exchange, June 2017.

Coutts K. and Rowthorn R. (2013) “The UK balance of payments. Structure and Prospects” Oxford Review of Economic Policy, 29: 307-325. 

Martin, B., and R. Rowthorn (2013) “Can Intangible Investment Explain the UK Productivity Puzzle? A Response and Comment” National Institute Economic Review, 226: R42-R49. 

Martin, B. and R. Rowthorn (2013) “A rejoinder to Goodridge, Haskel and Wallis” National Institute Economic Review, 226: R54.

Book chapters

Coutts, K. and Laskaridis, C. (2018) ‘Financial balances and the development of the Ethiopian Economy’, in F. Cheru, F. Crame, and C. Oqubay, Oxford Handbook of the Ethiopian Economy (Oxford: OUP), forthcoming.

Gudgin, G. and Coutts, K. (2014) ‘Should the UK continue to follow liberal economic policies?’, in J. Green and C. Hay (eds.) The British Growth Crisis (Basingstoke: Palgrave Macmillan), forthcoming. 

Special reports

Coutts, K and Gudgin, G. The Macroeconomic Impact of Liberal Economic Policies in the UK, CBR Special Report April 2015.

Martin, B. and Rowthorn, R. (2012) Is the British economy supply constrained II? A renewed critique of productivity pessimism, CBR and UK~IRC, May.

Martin, B. (2011) Is the British economy supply constrained? A critique of productivity pessimism, CBR and UK~IRC, July.

Martin, B. (2010) Rebalancing the British Economy: A strategic assessment, Centre for Business Research and UK~IRC, Cambridge and London, April.

Working papers

Coutts, K., Gudgin, G. and Gibson, N., “How the Economics Profession Got it Wrong on Brexit“, Centre for Business Research, University of Cambridge Working Paper No. 493,  January 2018.

Martin, B., “A Comment on Oulton, ‘The UK Productivity Puzzle: Does Arthur Lewis hold the key?‘”, CBR WP498, March 2018.

Gudgin, G. Coutts, K. and Gibson, N. (December 2016), ‘The macroeconomic impact of Brexit: using the CBR macroeconomic model of the UK Economy‘, Centre for Business Research, University of Cambridge, Working Paper No. 483.

Gudgin, G. Coutts, K. Gibson, N and Buchanan, J. (May 2017), ‘The Role of Gravity Models in Estimating the Economic Impact of Brexit‘, Centre for Business Research, University of Cambridge, Working Paper No. 490.

Coutts, K. and Gudgin, G. (2015) ‘The CBR Macro-Economic Model of the UK Economy (UKMOD)’.

Gudgin, G., Coutts, K., Gibson, N. (Ulster University), and Buchanan, J. (Ulster University).Centre for Business Research: UK Economy Forecast Report. Autumn 2015. CBR Special Report (November 2015).  

Gudgin, G. The UK macro-economy database was extended and updated in line with the 2014 Blue Book. In conjunction with Neil Gibson and Jordan Buchanan at the Ulster University Economic Development Centre software was created to manage changes in national accounts data, associated re-estimation of equations and other management tasks connected with the UK macro-economy dataset and the UKMOD model. 

Coutts, K. and Rowthorn, R. (2013) ‘De-Industrialisation and the balance of payments in advanced economies’ Foresight Future of Manufacturing Project, Evidence Paper 31, London: BIS. 

Coutts, K. and Rowthorn, R. (2013) ‘Update of prospects for the UK balance of payments’, Foresight Future of Manufacturing Project, Evidence Paper 30, London: BIS. 

Coutts, K. and Rowthorn, R. (2013) ‘Re-industrialisation – a commentary’, Foresight Future of Manufacturing Project, Evidence Paper 32, London: BIS. 

Conference/Workshop papers

Gudgin, G. Conference on Legal and Economic Impact of Brexit, Peterhouse College, Cambridge. Paper on ‘Economic Impact of Brexit’, 30 March 2017.

Gudgin, G. University of Buckingham Conference on the Impact of Brexit. Paper on ‘Economic Impact of Brexit’, 26 June 2017.

Gudgin, G. Clash of the Titans conference, ‘Short-term Forecasts for the UK economy in the context of Brexit’, Royal Institution London, February 2017.

Gudgin, G. ‘Not the OBR A Macro-economic Policy Model of the UK Economy with insights from Godley & Lavoie’, with Ken Coutts Post Keynesian Economics Study Group Annual Conference, Greenwich University, June 2016.

Gudgin, G. ‘A Macro-Economic Policy Model of the UK Economy. A Brexit scenario’, with Ken Coutts. Seminar paper given at Kingston University Department of Economics Seminar Series, October 2016. 

Gudgin, G and Gibson, N. gave a workshop on the UK macro-economic model at the Ulster University June 8th 2015. This was attended by civil servants and business representatives in Northern Ireland. 

Gudgin, G. Cambridgeshire County Council, East of England Forecasting Model Spring 2014 Forecasts and Dwellings Targets Scenario. This project organised by Oxford Economics Ltd provided forecasts, scenarios and advice for local authorities in the East of England co-ordinated by CCC. 

Gudgin, G. Workshop on better use of evidence for policy-making – EU Commission Brussels, 15/16 May 2014.

Gudgin, G. The Causes and Consequences of the Long Expansion 1992-2007. Clare College, Cambridge 19/20 September. 2013 .


Gudgin, G. Two complete updates of the macro-economic datasets for the CBR Macro-economic model of the UK Economy. Work largely undertaken by colleagues at Ulster University (Prof Neil Gibson and Jordan Buchanan). The UKMOD database is now compliant with the 2016 ONS National Accounts Blue Book, with further data for 2016 using ONS quarterly statistics. 

Gudgin, G. New large scale trade dataset compiled by Prof Neil Gibson and Jordan Buchanan to facilitate research on gravity models. Innovative software written by Prof Gibson allowed partial datasets to be constructed for specified dates, giving considerable flexibility. 

Other publications

Martin, B. (2013) ‘Capital Investment: what are the main long-term trends in relation to UK manufacturing businesses, and how do these compare internationally?’ Foresight Project: The Future of Manufacturing Evidence Paper 8, Department for Business, Innovation & Skills, April, 2013.    

Martin, B. and Rowthorn, R. (2013) ‘Can Intangible Investment Explain the UK Productivity Puzzle? A Response and Comment’, CBR note, July.

Media coverage

Gudgin, G. Sunday Telegraph, Simon Heffer, “Impact of Brexit”.

Gudgin, G. London Evening Standard, Anthony Hilton, “Economic Impact of Brexit”. 

Markou, C. The Independent, (Several occasions).

Gudgin, G. Coverage received on launch of Liberal Markets report in the Observer and Guardian newspapers. 

Gudgin, G. Took part in 30 minute discussion on Share radio, London, 14 September on Liberal markets Report.

MPhil students supervised

Gudgin, G. supervised Saite Lu (Sydney Sussex College) financial Modelling in a Stock-Flow Equilibrium Context.

Project leaders

Bill Martin
Graham Gudgin

Project team

Ken Coutts
Graham Gudgin
Bob Rowthorn
Neil Gibson (Ulster)

Project status