To Change or not to Change: The Evolution of Forecasting Models at the Bank of England

In this article, we document the way modellers navigate between modelling choices, based on (1) the modellers’ own dispositions, which depend on their training, their academic standards, and their integration in national or international professional networks; (2) the visions of policymakers and executives at different levels of the institution’s hierarchy; and (3) the model’s function, which is shaped by the institution’s organisation and mandates—any model has to be (at least partly) successful in the accomplishment of this function. We use as a case study the Bank of England and the different macroeconometric models developed within the Bank until the most recent one (COMPASS). This case study helps us to better understand the constraints to which modellers are confronted.

Six Decades of Economic Research at the Bank of England

This paper discusses the transformation of the content, role, and status of economic research at the Bank of England (BoE) in the past 60 years. We show how three factors (policy functions and missions of the Bank, its organisational structure, and the attitude of its executives towards economics) shaped the evolution of in-house BoE economic research during three distinctive periods (1960-1991; 1992-2007; 2007 - 2020). Our account relies on a broad set of sources and methods (BoE publications, archives, interviews with current and former BoE economists, citation analysis, prosopography, and topic modelling).

How the Phillips Curve Shaped Full Employment Policy in the 1970s: the Debates on the Humphrey-Hawkins Act

This article relates the history of economists’ influence in shaping the content of the Humphrey-Hawkins Act (1978) and its immediate consequences. The Act committed the federal government to reduce as soon as 1983 unemployment to 4 percent and inflation to 3 percent. Initially, the Humphrey-Hawkins bill was conceived as a project to favor economic integration of African Americans and economic planning, and only targeted the unemployment rate. The Republican senators successfully pushed for integrating a numerical inflation target during the debates in Congress in 1978. The Humphrey-Hawkins Act eventually appeared as a bill putting on an equal footing inflation and unemployment. I argue that the economists in Carter’s administration, and notably the CEA, were instrumental, even if unintentionally, in favoring the integration of an inflation target and such an interpretation of the bill. In the debates that opposed them to the supporters of the bill, as well as in the analysis of the bill they produced, they constantly referred to the existence of a trade-off between inflation and unemployment (the famous Phillips curve). They endeavored to anchor their expertise on academic publications, which strengthened the role of the Phillips curve in shaping the debates. Both the business organizations and senators used this reference to the trade-off to undermine the bill and favor the integration of an inflation target.

Macroeconomics at the crossroads: Stagflation and the struggle between “Keynesian” and New Classical macroeconometric programs

Lucas and Sargent’s “After Keynesian Macroeconomics” is considered as a cornerstone of macroeconomics history and is supposed to have seriously undermined “Keynesian” approach to macroeconometric modelling. I study the context of this article, its writing, its presentation in a conference with many advocates of large-scale models and the debates that followed. I demonstrate that the issue of stagflation was closely linked to Lucas and Sargent’s argument, and the opposition of “Keynesians” relied on their different interpretation of stagflation. I show this interpretation of stagflation led to a different research program, which has been overlooked by history of macroeconomics.

Criticizing the Lucas Critique: Macroeconometricians' Response to Robert Lucas

The purpose of this article is to provide a better explanation of the reactions of the Keynesian macroeconometricians to the Lucas Critique in the years following its publication and, finally, to provide a better explanation of the success of the Lucas Critique. Our explanation will be based on an interpretation of “Econometric Policy Evaluation” both as a positive and as a prescriptive statement. We think that this duality is present as well in Lucas's paper and in the reactions to it. This allows us to better understand why Kenesians did not provide a global, pertinent, convincing response to Lucas, which weakened their position inside the profession.