We estimate the impact of financial liberalisation on consumption in seven major industrial countries, and find a marked shift in behaviour, notably a decline in short-run income elasticities and a rise in short-run wealth and interest rate elasticities. A corollary is that consumption equations estimated over both pre- and post-liberalisation regimes may be misleading, and either a form of testing as presented here or a shortening of the sample period may be appropriate for accurate forecasting and simulation.

We contribute to the ongoing debate about the benefits to the UK economy of membership of the European Union by assessing the macroeconomic consequences of withdrawal using simulation analyses on the NIESR macroeconometric model of the UK economy under endogenous fiscal and monetary policies. We draw on research that highlights the role of EU policies in the level of international trade and investment undertaken by Member States, and the implications of those international linkages for long-term productive potential.