In November 2022, in Briefing Paper No. 8: Forecasting potential output – the supply side of the economy, we described the framework we use when assessing whether and how to incorporate the impact of policy measures on our forecast for potential output (the ‘supply-side’ of the economy). We have applied this framework in our November 2022 and March 2023 forecasts, as set out in Box 1 of our November 2022 and Box 2.1 of our March 2023 Economic and fiscal outlooks (EFOs).
This summer, we are reviewing our approach to assessing the supply-side impacts of government policy. In particular, we would be interested in your views on the following issues:
- When should we incorporate supply-side effects from government policies in our forecasts? Do you agree with the general criteria set out in paragraph 5.3 of our Briefing Paper – that we should only do so when a policy’s impact on potential output is judged to be significant, durable, additional, and evidence-based?
- Do you have any comments on how we have applied these criteria in our recent forecasts (for instance, as set out in the two Boxes noted above)?
- When and how should we adjust our potential output forecast in response to policies that affect labour supply?
- When and how should we adjust our potential output forecast in response to policies that affect the economy-wide stock of capital?
- When and how should we adjust our potential output forecast in response to other policies, including those that affect total factor productivity?
- Do you have any other comments or is there anything else that you would like to draw to our attention regarding the supply-side impact of government policy?
Send your responses to [email protected] by 14 July 2023.