ABSTRACT
The UK has had a turbulent recession, emerging at the time of writing with a very large fiscal deficit and major loss of output relative to trend, as well as quite high headline inflation and slow credit growth. There has been widespread discussion of the role of discretionary policy in overall developments and this is the focus of this chapter. We mainly analyse central-bank monetary, macroprudential and banking policies, although we also comment on certain structural and regulatory policies, and on macro/financial linkages in the UK. The paper is in four sections: first we comment on certain issues in the run-up to the crisis; second we assess policy efficacy in the crisis itself; third we discuss exit strategies; and fourth we consider the scope for a return to growth, focusing on the housing market and the banking sector.
