The NIESR blog is a forum for Institute research staff to provide an informed, independent view on current economic issues and recent NIESR research. The views expressed here are those of the authors, and are not necessarily those of the Institute.
Last year, I was invited to present a keynote address to the 20th annual conference of the FMM Research Network on Macroeconomics and Macroeconomic Policies, “Towards Pluralism in Macroeconomics”, held in Berlin on October 20th – 22nd.
The February 2017 National Institute Economic Review discusses the possible consequences for the US economy of the significant changes in economic policy promised by the new US administration.
In yesterday’s blog post we discussed findings from our research on older workers and the workplace. Our focus was on the experiences of older workers, but today we consider the employer perspective. The fact that older individuals are remaining in work is good news for the individuals concerned, since working is associated with higher incomes and better health. It is also good for the Exchequer, increasing the tax take. But is it good for employers?
More and more older individuals are working. It’s good news that more people are working longer, with potential benefits for both individuals and the economy. But employment rates still drop notably when people reach their 50s and 60s.
Rules have become an increasingly prominent – even defining – feature of EU economic governance as a result of the various reforms undertaken to resolve the euro crisis. There are now rules on fiscal deficits and debt levels, set out in the Stability and Growth Pact (SGP), and an EU Directive required Member States to enshrine fiscal rules in their national legal order.
A basic principle in economics is that there is no free lunch. To get something we want, we have to give up something we like. The Prime Minister made crystal clear in her Lancaster House speech last week that Brexit is about restoring parliamentary sovereignty. What she failed to make clear was what we will be giving up.
Theresa May's 12 point plan for negotiating with the EU included two key announcements regarding trade: the UK will not seek membership of the single market, and the UK wishes to abandon the EU’s common external tariff, in order to be free to negotiate trade agreements with third countries.
This blog provides a range of projected impacts on UK trade of these policies.
How does a government reduce its public debt burden relative to national income, which is what I mean by a fiscal consolidation? There are a number of obvious instruments that might bear immediate fruit: reduce the flow of government deficits by increasing taxes or reducing government expenditure or to develop expenditures that increase output by more than the increase in the deficit. The latter is of course the search for the holy grail of a multiplier greater than one and the former is often termed 'austerity'.
At noon today, the Prime Minister will set-out the government’s strategy for Brexit. Mrs May will no doubt repeat that Brexit means Brexit. But the important question is what will be the UK’s future economic arrangement with the EU? The Prime Minister will try and keep her options open, but the trade-offs involved seem to make a ‘Hard Brexit’ inevitable
Outside it is rather miserable. It is wet, windy and dark. And Blue Monday looms. But at the Institute January is a forecast month, so we are kept warm by the comfortable whirring of economists running models, assessing data, understanding deviations of outcomes from expectations and applying dollops of judgement.
In a Keynesian view of the world, the joint actions of monetary and fiscal policy set the level of overall demand in the economy.
Christmas is here and being marked in the British way by excessive consumption of food and drink, harvested, processed, delivered and served thanks to the labour of migrant workers.
We are asked to consider what has caused this year's revolt against the conventional wisdom that liberal capitalism is the best way to guarantee economic welfare. It is too early to account for all the reasons. But a primary candidate is the continuing inability of the economy to generate median real wage growth
After the UK referendum and the US presidential election result, there were significant movements in asset prices. Notably in the UK, the exchange rate fell by some 15% and, surprisingly in the immediate aftermath, term premia also fell by some 20Bp. But following the recent Italian referendum result and the announcement of the resignation of the Italian Prime Minister on December 4, although Italian term premia have been volatile, there has been little overall change in premia. For example, the two day change in term premia from 5 to 7 December was around 2Bp. I suggest that one reason for the relative stability is the ECB's QE programme which is providing support for bond prices with respect to changes in risk.
Economic forecasters ought to be thankful for pollsters otherwise they might look very bad indeed. The story often told is that a recession was forecast in the event of a vote to leave the European Union and because there has been no recession, economic forecasters have let us down. This story is not quite the truth
As far back as August I predicted that Brexit (among other factors) would lead to a sharp fall in EU migration. There are tentative - but only that - signs of that in today’s data – although it’s very early days yet.
The long tussle between rules and discretion in policy-making moved decisively towards rules in the 1980s. A generation of monetary economists have subsequently concerned themselves with the development of a commitment technology for central banks. By which it is meant mechanisms that would lead households and firms to believe that a given objective will tend to be hit.
The OBR yesterday revealed its forecast of the impact of Brexit on UK growth and the public finances. I won’t add to the word count. But one interesting point the extent to which the OBR was happy to highlight the negative impact of the reduction in migration it expects to result from Brexit.
The change of Chancellors has brought change in direction for fiscal policy. Ex-Chancellor Osborne argued that given the level of debt, austerity and a fiscal straight-jacket were necessary to maintain economic and financial confidence. Chancellor Hammond faces even higher debt levels and more uncertainty, but chose to reduce austerity and opt for a non-binding fiscal rule.
The Chancellor of the Exchequer, Philip Hammond, will present his Autumn Statement to Parliament on Wednesday. In the heated debate over austerity, this piece offers three facts about debt and deficits which, I hope, will help shed light on the issues he will face.