Publications

How much risk is the USS taking?

Publication date: 28 Sep 2021 | Publication type: NIESR Discussion Paper | Theme: Macroeconomics | External Author(s): Miles, D, Sefton, J | NIESR discussion paper number: 532

We analyse the probability distribution of outcomes for the USS in the light of conflicting claims about its sustainability in the absence of changes in contributions or in benefits. We find that a substantial investment in riskier assets (equities) makes the average outcome one in which the scheme...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: New cases forecast to decline in all but the young

Publication date: 23 Sep 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C

Main Points We report R estimates and forecasts of new cases and hospital admissions for England and Scotland. The R number has fallen below 1 in all nations and regions apart from Wales where it is slightly above 1 (Figure 1). For the adult population in England, we forecast declines in new...

NIESR CPI tracker - September 2021 - Underlying inflation cautious against panic

Publication date: 15 Sep 2021 | NIESR Author(s): Boshoff, J

Main points While the headline consumer inflation increased by a large margin, from 2 per cent in July 2021 to 3.2 per cent in August, the rise in underlying inflation was more limited. Our measure of underlying inflation as measured by the trimmed mean, which excludes 5 per cent of the highest...

NIESR Wage Tracker - September 2021 - Labour market recovery on track as furlough ends

Publication date: 14 Sep 2021 | Publication type: NIESR Wage Tracker | NIESR Author(s): Lenoel, C

Figure 1 - The U-shaped recovery in the labour market (source: ONS, HMRC) Main points The labour market shows signs of a U-shaped recovery, with the number of payrolled employees returning in August to its pre-pandemic (February 2020) level of 29.1 million. Employment growth is fastest in...

What economic complexity theory can tell us about the EU’s pandemic recovery and resilience plans

Publication date: 13 Sep 2021 | Publication type: Policy Paper | NIESR Author(s): Macchiarelli, C | External Author(s): Hausmann, R, Santos, M, Giacon, R | Report number: 28

A little over a year ago, the EU’s political leaders agreed on an unprecedented fiscal package – dubbed ‘Next Generation EU’ – to aid Europe’s recovery from the pandemic. Ricardo Hausmann, Miguel Angel Santos, Corrado Macchiarelli and Renato Giacon write that economic complexity theories can...

September 2021 GDP Tracker - Reopening bounce slows as Delta hits

Publication date: 10 Sep 2021 | NIESR Author(s): MacQueen, R

Main points Growth of only 0.1 per cent in July was the lowest since January. The weaker than expected outcome resulted from the end of the spring re-opening boom at the same time as the Delta variant hit labour supply and consumer confidence. We forecast growth to pick up in August, thanks to...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Back to School - Moderate Rise in New Cases Forecast

Publication date: 9 Sep 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C

Main Points We resume our bi-weekly series, reporting R estimates and forecasts of new cases and hospital admissions for England and Scotland, after a short summer break. Figure 1 compares our August 12th forecasts of new cases with actual cases for England in the following 4 weeks. This...

NIESR Term Premium Tracker - UK Term Premium Drops to Four Month Low Over Summer

Publication date: 9 Sep 2021 | Publication type: NIESR Term Premium Tracker | NIESR Author(s): Macchiarelli, C

Figure 1: UK 10-year government bond yield and decomposition (percent) We decompose long-term treasury yields into two components: expectations of the future path of short-term bond yields and a term premium. The term (or risk) premium is the compensation investors require for bearing the risk...

Commentary: Quantitative tightening: Protecting monetary policy from fiscal encroachment

As we face up to the need to plan an eventual exit from quantitative easing (QE), in this Commentary we consider how to reform both sides of the central bank balance sheet in a manner that will prepare the ground for a contraction in the balance sheet that does not expose the central bank to...

NIESR Wage Tracker - August 2021

Publication date: 17 Aug 2021 | Publication type: NIESR Wage Tracker | NIESR Author(s): Lenoel, C

The U-shape recovery of the labour market Main points The labour market recovery is in a U shape, with the number of payrolled employees higher than in April 2020 and the number of vacancies at a record high of 953,000. A robust growth of labour demand and limited candidate availability are...

Modelling the impact of Covid-19 on the UK economy: an application of a disaggregated New-Keynesian model

We set out a framework that can be used to evaluate policies intended to mitigate the economic effects of Covid-19. In our framework shocks that affect only certain sectors can spill over to other sectors because of input-output linkages and limited income insurance. We show that policies such as...

August 2021 GDP Tracker

Publication date: 12 Aug 2021 | Publication type: NIESR GDP Tracker | NIESR Author(s): KucukH

Rapid growth to slow in third quarter Main points June’s month-on-month growth of 1 per cent in GDP was mainly driven by the effects of reopening which led to a 1.5 per cent growth in services sector in June 2021. Return to some normality in health activities and increased demand for indoor...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Breakthrough Infections Detected

Publication date: 12 Aug 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C

Breakthrough Infections Detected Main points We highlight a somewhat muted reversal of the decline in cases that was evident two weeks ago, and offer possible explanations. Our next tracker will be released on 9th September. It is likely that some of the increased infection transmission resulting...

NIESR CPI Tracker - August 2021 - Base effects nudge inflation lower

Publication date: 8 Aug 2021 | Publication type: NIESR CPI Tracker | NIESR Author(s): Boshoff, J

Main points Underlying inflation decreased from 1.6 per cent in June to 1.4 in July as measured by the trimmed mean, which excludes 5 per cent of the highest and lowest price changes (figure 1). Headline consumer inflation decreased by a larger margin, decreasing to 2 per cent in July from 2.5...

Summary of the NIESR Business Conditions Forum July 2021 - Business survey data: What can the PMI tell us about post-Covid UK recovery and inflation?

Publication date: 5 Aug 2021 | Publication type: Business Conditions Forum Summary

Agenda The discussion at this meeting focused on what insight that can be gleaned from business survey data about the UK post-Covid recovery, and what that means for inflation in the future.

UK Economic Outlook Summer 2021: Emerging from the Shadow of Covid-19

Publication date: 2 Aug 2021 | Publication type: National Institute UK Economic Outlook | Theme: Macroeconomics | NIESR Author(s): KucukH, Lenoel, C, MacQueen, R | Journal: National Institute UK Economic Outlook No. 3 Vol. Series A Issue Summer 2021 | Publisher: NIESR, London

In our Summer forecast for the UK economy GDP grows by 6.8 per cent in 2021, an upward revision of 1.1 percentage points since May’s Spring Outlook, and 5.3 per cent in 2022. The latest data suggest that – while headline growth and business optimism are strong – the recovery is not yet broad-based...

Global Economic Outlook Summer 2021: Lifting the Pandemic Cloud

Publication date: 2 Aug 2021 | Publication type: National Institute Global Economic Outlook | Theme: Macroeconomics | NIESR Author(s): Macchiarelli, C, Naisbitt, B, Boshoff, J, Holland, D, Hurst, I, Liadze, I, Mao, X, Sánchez Juanino, P, Thamotheram, C, Whyte, K | Journal: National Institute Global Economic Outlook No. 3 Vol. Series B Issue Summer 2021 | Publisher: NIESR, London

A preview of NIESR's Summer 2021 Global Economic Outlook can be found below. The full outlook is only available to subscribers. If you are interested in subscribing to this publication, please subscribe here. Our Summer global economic outlook projects slightly stronger short-term global economic...

The long and uncertain road to exiting Quantitative Easing

Publication date: 30 Jul 2021 | Publication type: Quarterly UK Economic Outlook Preview | NIESR Author(s): Lenoel, C

This is a preview from the Quarterly UK Economic Outlook, August 2021. There is a rich literature on Quantitative Easing (QE) but less so on its unwinding. QE was initiated in 2001 in Japan, followed by the US in 2008 after the Global Financial Crisis, and there has been time to evaluate it, while...

Foreign aid makes good macroeconomic sense

Publication date: 30 Jul 2021 | Publication type: Quarterly UK Economic Outlook Preview | NIESR Author(s): Holland, D | External Author(s): Dirk Willem te Velde

This is a preview from the Quarterly UK Economic Outlook, August 2021. On 25 November 2020, the UK government took the decision3 to reduce the budget for foreign aid from 0.7 to 0.5 per cent of gross national income (GNI) in 2021. On 13 July 2021, Parliament voted in favour of maintaining these...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: After the Euros spike, herd immunity may be in sight

Publication date: 29 Jul 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C

Figure 3: National Forecasts of New COVID-19 Cases Main points Two weeks ago, on July 15th, we highlighted the strong signs of the Delta wave was approaching a peak in the North West. We pointed out that other regions would likely follow suit. Data across nations, regions and local...

Quantitative Tightening: Protecting Monetary Policy from Fiscal Encroachment

Publication date: 28 Jul 2021 | Publication type: Policy Paper | Theme: Macroeconomics | NIESR Author(s): Chadha, J S, Allen, W. A., Turner, P | Report number: 27

As we face up to the need to plan an eventual exit from quantitative easing, in this Commentary we consider how to reform both sides of the central bank balance sheet in a manner that will prepare the ground for a contraction in the balance sheet that does not expose the central bank to excessive...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Signs of peaking

Publication date: 15 Jul 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C

Signs of peaking Main points We comment on the Delta variant wave that has emerged throughout the UK. Focussing on the North West where this wave emerged first can be revealing as to how the wave is likely to advance in other regions of the UK that saw later outbreaks. Figure 1 provides R...

NIESR Wage Tracker - July 2021

Publication date: 15 Jul 2021 | Publication type: NIESR Wage Tracker | NIESR Author(s): Lenoel, C

Underlying wage growth accelerates to 3.8% because of labour shortages in some sectors Main points A strong growth of labour demand and limited candidate availability is creating temporary labour shortages in some sectors like health and social services. Vacancies reached a record 862,000....

NIESR CPI Tracker - July 2021

Publication date: 14 Jul 2021 | Publication type: NIESR CPI Tracker | NIESR Author(s): Boshoff, J

Underlying inflation signals additional price pressures Main points Underlying inflation increased from 1.2 per cent in May to 1.6 in June, its highest level since April 2018 as measured by the trimmed mean, which excludes 5 per cent of the highest and lowest price changes (figure 1). Headline...

Migrant students in the UK pandemic - Impacts, school reponses and community approaches

Publication date: 13 Jul 2021 | Publication type: Report | NIESR Author(s): Manzoni, C, DAngeloA

Lockdowns and school closures in response to Covid-19 have impacted on all students in the UK, but have also acted as multipliers of educational inequalities. Among the most vulnerable are newly arrived migrant children, as they tend to be less familiar with the educational system and life in the...

July 2021 GDP Tracker

Publication date: 9 Jul 2021 | Publication type: NIESR GDP Tracker | NIESR Author(s): MacQueen, R

Continued economic recovery put in doubt by Delta variant Figure 1 - UK GDP Main points May’s month-on-month growth of 0.8% disappointed, with little sign of momentum in either April or May outside the sectors which grew due to the lifting of Covid-19 restrictions. With several indicators showing...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Geographic spill over

Publication date: 1 Jul 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C Issue 18

Main points We comment on the structure and composition of the widely anticipated wave emerging in the UK. The advancing pattern is consistent with a race between, on the one hand, local surges that spill over geographically due to higher transmissibility of the now dominant Delta variant, and...

Commentary: Proposals for a new fiscal framework

Modern representative democracy is faced with the Whiggish directive to improve living standards with the main lever in possession of any government being its fiscal policy. That is its choice on how much to spend, tax and borrow and on what. The electorate is supposed to assess the alternate...

Introduction: The COVID-19 pandemic and macroeconomic forecasting

The Spring 2021 issue of the National Institute Economic Review examines the challenges of macroeconomic forecasting during the Covid-19 pandemic and publishes four solutions proposed by leading academic researchers in macroeconomic forecasting. These contributions show how innovative methodologies...

The value of robust statistical forecasts in the COVID-19 pandemic

Publication date: 23 Jun 2021 | Publication type: National Institute Economic Review | External Author(s): Castle, J, Doornik, J A, Hendry, D F | JEL Classification: C22, C53, E27 | Journal: National Institute Economic Review Issue 256 | Publisher: Cambridge University Press

The Covid-19 pandemic has put forecasting under the spotlight, pitting epidemiological models against extrapolative time-series devices. We have been producing real-time short-term forecasts of confirmed cases and deaths using robust statistical models since 20 March 2020. The forecasts are...

Nowcasting ‘true’ monthly U.S. GDP during the pandemic

Expenditure-side and income-side gross domestic product (GDP) are measured at the quarterly frequency and contain measurement error. Econometric methods exist for producing reconciled estimates of underlying true GDP from these noisy estimates. Recently, the authors of this paper developed a mixed-...

Can machine learning catch the COVID-19 recession?

Publication date: 23 Jun 2021 | Publication type: National Institute Economic Review | External Author(s): Coulombe, P G, Marcellino, M, Stevanovic, D | JEL Classification: C53; C55; E37 | Journal: National Institute Economic Review Issue 256 | Publisher: Cambridge University Press

Based on evidence gathered from a newly built large macroeconomic dataset (MD) for the UK, labelled UK-MD and comparable to similar datasets for the United States and Canada, it seems the most promising avenue for forecasting during the pandemic is to allow for general forms of nonlinearity by...

Tracking the mutant: Forecasting and nowcasting COVID-19 in the UK in 2021

A new class of time series models is used to track the progress of the COVID-19 epidemic in the UK in early 2021. Models are fitted to England and the regions, as well as to the UK as a whole. The growth rate of the daily number of cases and the instantaneous reproduction number are computed...

Nowcasting GDP growth in a small open economy

Nowcasting, that is, forecasting the current economic conditions, is a key ingredient for decision making, but it is complex, even more so for a small open economy, due to the higher volatility of its GDP. In this paper, we review the required steps, taking Luxembourg as an example. We consider...

The Dasgupta review: Supplementary notes on investment in conservation and restoration, family planning, and reproductive health

Three broad categories of transformative changes have been recommended in The Economics of Biodiversity: The Dasgupta Review (henceforth Review): (i) The need to address the imbalance between our demands on Nature and its supply. (ii) The need to change our measures of economic success. (iii) The...

NIESR Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Surges, spill overs and swells

Publication date: 17 Jun 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C

NIESR CPI Tracker - June 2021

Publication date: 16 Jun 2021 | Publication type: NIESR CPI Tracker | NIESR Author(s): Boshoff, J

Lockdown unwinding boosts underlying inflation Main points Underlying inflation increased from 0.9 per cent in April to 1.2 per cent in May, displaying a smaller rise than headline consumer inflation which rose by 0.6 percentage points, reaching 2.1 per cent in May. The trimmed mean, which...

NIESR Wage Tracker - June 2021

Publication date: 15 Jun 2021 | Publication type: NIESR Wage Tracker | NIESR Author(s): Lenoel, C

Temporary rise in average wages, but underlying wage growth to stay around 2½ per cent Main points The labour market is continuing to recover from the pandemic, with employment, vacancies and wages all increasing. The recovery driven by improved confidence and the reopening of sectors of the...

June 2021 GDP Tracker

Publication date: 11 Jun 2021 | Publication type: NIESR GDP Tracker | NIESR Author(s): MacQueen, R

Strong start to second quarter driven by re-opening Figure 1 - UK GDP Main points Another month of rapid service sector growth in April was driven by the re-opening of sectors affected by Covid-19 restrictions, resulting in a 2.3 per cent growth in monthly GDP almost in line with our May Tracker...

Modelling and Estimating Large Macroeconomic Shocks During the Pandemic

Publication date: 11 Jun 2021 | Publication type: NIESR Discussion Paper | NIESR Author(s): Corrado, L | JEL Classification: C11, C51, E30 | NIESR discussion paper number: 530

Abstract This paper proposes and estimates a new Two-Sector One-Agent model that features large shocks. The resulting medium-scale New Keynesian model includes the standard real and nominal frictions used in the empirical literature and allows for heterogeneous COVID-19 pandemic exposure across...

NIESR Term Premium Tracker - June 2021

Publication date: 4 Jun 2021 | Publication type: NIESR Term Premium Tracker | NIESR Author(s): Macchiarelli, C Issue 1

Government Bond Term Premium Tracker UK treasury yields rise due to an increase in the term premium Main points Despite continued support from the Bank of England through low interest rates and quantitative easing, the UK 10-year bond yield has risen since last summer. As economic...

NIESR Weekly Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Waves or Spikes?

Publication date: 3 Jun 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C Issue 16

Main points With this edition we refocus the tracker on local surges in infection to address the question whether sudden increases observed are local spikes or are indicative of the start of a new wave. Given the divergence among local areas in case rates, and surge testing in areas with high...

NIESR Weekly Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Continued local surges and flare ups

Publication date: 27 May 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C Issue 15

Main points We report estimates of the R number and forecasts for new cases of Covid-19, hospital admissions, and deaths due to Covid-19 using data that was publicly available as of 25th May 2021. In light of the low case rates (see below) this tracker will now be produced at fortnightly...

NIESR Weekly Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Local surges and flare ups

Publication date: 20 May 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C Issue 14

Main points We report estimates of the R number and forecasts for new cases of Covid-19, hospital admissions, and deaths due to Covid-19 using data that was publicly available as of 18th May 2021. Figure 1 shows that the Reproduction number, R, for England. R is the average number of secondary...

Micro level data for macro models: the distributional effects of monetary policy

Publication date: 20 May 2021 | Publication type: NIESR Discussion Paper | External Author(s): Corrado, L, Fantozzi, D | JEL Classification: C81, D31, E52, E58 | NIESR discussion paper number: 529

Abstract In this paper we investigate the effect of standard and non-standard monetary policy implemented by the ECB on income inequality in Italy. We use a novel database based on the survey micro level data on Income and Living Conditions (EU-SILC, Istat) in a repeated cross-section experiment...

NIESR CPI Tracker - May 2021

Publication date: 19 May 2021 | Publication type: NIESR CPI Tracker | NIESR Author(s): Boshoff, J

Underlying inflation at 6-month high Main points Underlying inflation increased to a six-month high in April. The trimmed mean, which excludes 5 per cent of the highest and lowest price changes, recorded 0.9 per cent in April, up from 0.6 per cent in March 2021 (figure 1). 18.3 per cent of goods...

NIESR Wage Tracker - May 2021

Publication date: 18 May 2021 | Publication type: NIESR Wage Tracker | NIESR Author(s): Lenoel, C

No sign of persistent wage inflation despite lower unemployment and higher vacancies Main points NIESR’s wage tracker predicts that average weekly earnings growth will be 5.3 per cent in the second quarter of 2021, after 4.0 per cent in the first quarter. The increase is explained by both...

NIESR Weekly Covid-19 Tracker: Reproduction Number (R) and Forecasts of New Cases: Daily cases to rise slightly

Publication date: 13 May 2021 | Publication type: NIESR Covid-19 Tracker | NIESR Author(s): Thamotheram, C Issue 13

Main points We report estimates of the R number and forecasts for new cases of Covid-19, hospital admissions, and deaths due to Covid-19 using data that was publicly available as of 11th May 2021. Figure 1 shows that the Reproduction number, R, for England. R is the average number of secondary...

May 2021 GDP Tracker

Publication date: 12 May 2021 | Publication type: NIESR GDP Tracker | NIESR Author(s): MacQueen, R

Construction and education recovery to be followed by retail and hospitality Main points First quarter GDP growth of 1.5 per cent was in line with our April Tracker forecast. Today’s ONS data reported month-on-month growth of 2.1 per cent in March, reflecting the re-opening of schools, the...

UK Economic Outlook Spring 2021: Brisk but not Better Growth

Publication date: 10 May 2021 | Publication type: National Institute UK Economic Outlook | Theme: Macroeconomics | NIESR Author(s): KucukH, Lenoel, C, MacQueen, R No. Number 2 Vol. Series A | Publisher: NIESR, London

Our central forecast for economic growth in 2021 has been revised up to 5.7 per cent from 3.4 per cent in February. The immediate economic effects of the virus, which have been concentrated in the low-waged service sector, are expected to wane, while remaining negative consequences of Brexit will...