European Economics Home

The World Gold Council (WGC) has commissioned Europe Economics to provide a politico-economic assessment of its proposal for the use of gold as collateral for Eurozone sovereign debt, especially the debt of Italy and Portugal. The executive brief, which summarises the WGC’s proposal, considering its merits relative to other ECB schemes such as the Outright Monetary Transactions (OMT) programme, may be downloaded here.

Dr Andrew Lilico and Europe Economics have written a report for JT International and Gallaher Ltd. (both members of the Japan Tobacco Group), providing expert advice on the economic issues raised by aspects of the UK Department of Health’s consultation on standardised packaging of tobacco products. This report expands on our previous report, written in 2008, on “Economic analysis of a display ban and/or plain packs requirement in the UK”. 

This paper investigates whether movements in index-linked government bond yields are correlated with movements in medium-term GDP growth rates in the way one might expect from theory. The paper finds that movements in UK ten-year index-linked gilts can now be seen to have been highly correlated with movements in average ten-year GDP growth (a relationship that has not been obvious until the recent recession). As theory implies should be possible, we appear to be able to infer an excellent forecast for the ten-year ahead growth rate of the economy from the yield on index-linked bonds. When we apply this model to current data, the forecast growth rate is markedly lower than that produced by approaches such as those used by the UK Office for Budget Responsibility.