Publications

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...

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...

Monetary policy and government debt management during the coronavirus pandemic

This paper describes how the large budget deficits of 2020 in the United States and the United Kingdom were financed, how central banks are in practice managed not just short-term interest rates but also yields on government bonds, and how their ability to resist a post-coronavirus surge in...

How to not miss a productivity revival again

Publication date: 16 Mar 2021 | Publication type: National Institute Economic Review | External Author(s): van Ark, Bart, de Vries, Klaas, Erumban, Abdul | JEL Classification: D24; O47 | Journal: National Institute Economic Review Issue 255 | Publisher: Cambridge University Press

Over the past 15 years, productivity growth in advanced economies has significantly slowed, giving rise to the productivity paradox of the New Digital Economy – that is, the notion of increased business spending on information and communication technology assets and digital services without a...

Do economists expect too much from expectations?

Modern economic theory gives an important role to expectations as an influence on outcomes. This paper reviews evidence on how well measures of expectations conform to outcomes. It confirms earlier results that measures taken from financial markets perform poorly as predictors of outcomes. Looking...

The regional consequences of new digital infrastructure: Can Welsh SMEs gain an edge from access and adoption of superfast broadband?

Publication date: 16 Mar 2021 | Publication type: National Institute Economic Review | External Author(s): Henderson, D, Munday, M, Roberts, A | JEL Classification: O18; O33; R11 | Journal: National Institute Economic Review Issue 255 | Publisher: Cambridge University Press

Across the United Kingdom public (and private) resources have been targeted on improving broadband infrastructure. While this has served to provide new opportunities for households and firms, there has been some debate around the ability of firms to take full advantage of the opportunities that...

Aspirations failure, disadvantage traps and inclusive regional policy

This paper examines the implications for regional policy of new research on the role played by a failure in the ‘capacity to aspire’ [Appadurai, A. (2004), ‘The capacity to aspire’, in Rao, V. and Walton, M. (eds), Culture and Public Action, Washington, DC: World Bank.] in perpetuating disadvantage...

Rethinking evidence-based policy

Much of public policy has in recent decades been driven by the idea of evidence-based policy – policy rooted in the principles of social science and, more specifically, empirical validation based on social and behavioural science. This article argues that evidence-based policy, while helping to...

How long does economic injustice last?

This article assesses whether economic injustices that took place in the past still have significant implications for the material welfare of people many years later. That issue is central to the question of how fair is the distribution of wealth and income today. It is also relevant to issues of...

Commentary: Whither After Covid-19 and Brexit: A Social Science Perspective

Publication date: 22 Feb 2021 | Publication type: National Institute Economic Review | NIESR Author(s): Chadha, J S | Journal: National Institute Economic Review Issue 255 | Publisher: Cambridge University Press

The country is facing the twin traumas of managing two exits. Exit from the Covid-19 crisis and from the European Union. Of course, much of the world is dealing with the first and the European Union has also had the latter with which to contend. But the United Kingdom is set to lose permanently...

Real-Time Probabilistic Nowcasts of UK Quarterly GDP Growth Using a Mixed-Frequency Bottom-Up Approach

Read it here We propose a nowcasting system to obtain real-time predictive intervals for the first-release of UK quarterly GDP growth that can be implemented in a menu-driven econometric software. We design a bottom-up approach: forecasts for GDP components (from the output and the expenditure...

Assessing Long-Run Growth Prospects for the UK’s Regions

Read it here The UK faces a number of economic challenges in the short to medium term. Prior to COVID-19, renegotiation of trading arrangements with the European Union was the most prominent of these. We build on existing macroeconomic analysis by assessing prospects for the UK’s regions generated...

Banking Concentration and Financial Crises

Read it here Policymakers need to know if the structure of competition and the degree of banking market concentration change the incidence of financial crises. Previous studies have not always come to clear conclusions. We use a new dataset of 19 countries where we include capital adequacy and...

Modelling State-Contingent Fiscal Rules in the United Kingdom

Read it here I assess a novel rule that was introduced in the UK in 2015. It gave the British government fiscal flexibility whenever GDP growth warranted it. This rule lasted just a year, but it had features worth exploring. I apply solution methods for models with occasionally-binding constraints...

European Fiscal Rules as a Liability in the Transatlantic Trade Conflict: Lessons from NiGEM Simulations

Read it here Under the Trump administration, a transatlantic trade conflict has been escalating step by step. First, it was about tariffs on steel and aluminium, then about retaliation for the French digital tax, which is suspended until the end of the year. Most recently, the US administration...

The World Economy

Publication date: 2 Nov 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | NIESR Author(s): Naisbitt, B, Boshoff, J, Hurst, I, Macchiarelli, C, Mao, X, Sánchez Juanino, P, Thamotheram, C, Whyte, K | Journal: National Institute Economic Review Issue 254 | Publisher: Cambridge University Press

Responding to the threat to public health, lockdowns have led to the deepest contraction in global economic activity since the Second World War, with global GDP in the second quarter 10½ per cent lower than six months earlier. Activity indicators show a rise in global economic activity in the...

Prospects for the UK Economy

The economic contraction resulting from Covid-19 and resultant public health measures has been unprecedented. The public sector has acted as a shock absorber to protect households and businesses, temporarily raising government debt levels, but the recovery has been hampered by uncertainty,...

A Country Withered

Publication date: 29 Oct 2020 | Publication type: National Institute Economic Review | NIESR Author(s): Chadha, J S | Journal: National Institute Economic Review Issue 254 | Publisher: Cambridge University Press

This is the Commentary from the National Institute Economic Review, November 2020, no 254, written by NIESR Director Jagjit Chadha. Please find the full Document in pdf. "Economic progress is a disruptive, dynamic force. Change is as pervasive as it is necessary. Crises not only can drive these...

Living with Covid-19: balancing costs against benefits in the face of the virus

Publication date: 29 Jul 2020 | Publication type: National Institute Economic Review | External Author(s): Miles, D, Stedman, M, Heald, A | JEL Classification: I18; D61; E65 | Journal: National Institute Economic Review Issue 253 | Publisher: Cambridge University Press

This paper analyses the costs and benefits of lockdown policies in the face of COVID-19. What matters for people is the quality and length of lives and one should measure costs and benefits in terms of those things. That raises difficulties in measurement, particularly in valuing potential lives...

UK interregional inequality in a historical and international comparative context

Publication date: 29 Jul 2020 | Publication type: National Institute Economic Review | External Author(s): Carrascal-Incera, A, McCann, P, Ortega-Argilés, R, Rodríguez-Pose, A | JEL Classification: R11, R12, O47, O50 | Journal: National Institute Economic Review Issue 253 | Publisher: Cambridge University Press

This paper explores the nature and scale of inter-regional and inter-urban inequalities in the UK in the context of international comparisons and our aim is to identify the extent to which such inequalities are associated with strong national economic performance. In order to do this, we first...

Introduction: The Prospects for Regional Disparities in the UK in Times of Brexit and Covid-19

Publication date: 29 Jul 2020 | Publication type: National Institute Economic Review | NIESR Author(s): Bhattacharjee, A, Nguyen, D, Venables, T | Journal: National Institute Economic Review Issue 253 | Publisher: Cambridge University Press

Regional or spatial inequalities are a concern in most (if not all) countries and with the current ‘levellingup’ agenda they are also a priority of policymakers in the UK. Most often spatial inequalities are analysed as differences in GDP per capita or productivity at some subnational level of...

Regional disparities in labour productivity and the role of capital stock

Publication date: 29 Jul 2020 | Publication type: National Institute Economic Review | Theme: Trade, Investment & Productivity | External Author(s): Gardiner,B; Fingleton, B; Martin, B | JEL Classification: C23, C33, D24, O47, R12 | Journal: National Institute Economic Review Issue 253 | Publisher: Cambridge University Press

This paper reports on the availability of regional capital stock data, in the form of new/updated regional (NUTS2 level) capital stock estimates, building on an approach (Perpetual Inventory Method) which had been previously developed for the European Commission. The particular focus here is on the...

Understanding regional economic performance and resilience in the UK: trends since the global financial crisis

We investigate economic resilience of UK regions before, during and after the 2007/8 global financial crisis. We date business cycle turning points in real output, employment and productivity to assess the resilience dimensions of resistance, recovery and renewal and rank the economic resilience of...

Reconciled estimates and nowcasts of regional output in the UK

There is renewed interest in levelling up the regions of the UK. The combination of social and political discontent, and the sluggishness of key UK macroeconomic indicators like productivity growth, has led to increased interest in understanding the regional economies of the UK. In turn, this has...

COVID-19 impacts on destitution in the UK

Publication date: 29 Jul 2020 | Publication type: National Institute Economic Review | NIESR Author(s): Bhattacharjee, A, Lisauskaite, E | JEL Classification: E24; I32; C553; J82; L00; R11 | Journal: National Institute Economic Review Issue 253 | Publisher: Cambridge University Press

We use microsimulation combined with a model of the COVID-19 impacts on individuals and households to obtain projections of households in destitution in the United Kingdom. The projections are estimated at two levels: aggregate quarterly for the UK, for all quarters of 2020; and annual for 2020...

Prospects for the UK Economy

The combination of the Covid-19 pandemic and the public health measures taken to limit its spread here and overseas are forecast to contribute to a fall in GDP of 10 per cent in 2020. The level of economic activity in the final quarter of last year is not likely to be regained much before the...

Prospects for the World Economy

Publication date: 28 Jul 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | NIESR Author(s): Naisbitt, B, Boshoff, J, Holland, D, Hurst, I, Kara, A, Macchiarelli, C, Mao, X, Sánchez Juanino, P, Thamotheram, C, Whyte, K | Publisher: Cambridge University Press

The Covid-19 pandemic and the effects of the measures taken to protect lives continue to dominate the short-term global economic outlook. In still highly uncertain times, there are widespread falls in GDP as lockdowns pause many forms of economic activity. Some countries are now starting to...

Brexit and impact routes through global value chains

We analyse the trade routes between the UK and EU countries. Our results show that the relative importance of the UK as a trading partner in the EU has slightly decreased. We further decompose the total value added into components that quantify the value added that is generated through direct trade...

The EU’s shrinking share in global manufacturing: a value chain decomposition analysis

The EU´s falling share in global manufacturing has fuelled concerns about an overall loss of EU competitiveness, in particular vis-à-vis China. We analyse the empirical evidence underlying these concerns by applying a newly developed decomposition technique to global input-output data spanning the...

On the relevance of global value chains and the intra-European division of labour

This article first introduces the concept, the rationale, the causes and the genesis of global value chains from a worldwide perspective in the form of a brief overview. In the second empirical section, a closer look is taken at the intermediate trade integration in the EU. In particular, the...

Value chains and domestic competitiveness

Publication date: 29 Apr 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | External Author(s): Gasiorek, M, Smith, A, Tamberi, N | JEL Classification: F6, F14, F15, F17; F42 | Journal: National Institute Economic Review Issue 252 | Publisher: Cambridge University Press

With international trade increasingly undertaken within vertically fragmented supply chains, this paper considers the impact of changes in trade costs on domestic output. In the context of the UK’s exit from the EU we show that the negative impact on UK output will depend on changes in both...

Introduction: Global value chains and economic dislocations

The world is undergoing an unprecedented shock as a result of the Covid-19 pandemic and the resulting lockdowns in nearly all economies. As major world economies are being put on hold, millions of jobs and incomes are being lost, which has created an imperative for economic policy actions....

Prospects for the World Economy

Publication date: 28 Apr 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | NIESR Author(s): Naisbitt, B, Boshoff, J, Holland, D, Hurst, I, Kara, A, Liadze, I, Macchiarelli, C, Mao, X, Sánchez Juanino, P, Thamotheram, C, Whyte, K | Journal: National Institute Economic Review Issue 252 | Publisher: Cambridge University Press

The effects of the coronavirus pandemic and the control measures taken to combat its spread have changed the short-term global economic outlook in an unprecedented manner from that forecast just three months ago. In these highly uncertain times, we now expect widespread falls in GDP, particularly...

Prospects for the UK Economy

Measures to limit the spread of Covid-19 are causing a severe contraction in economic activity of uncertain magnitude. In our main-case scenario, GDP falls by 7 per cent in 2020 and public sector borrowing rises above £200 billion in 2020–21, over £150 billion more than in the OBR's forecast at...

Commentary - Monetary policy in troubled times

Publication date: 27 Apr 2020 | Publication type: National Institute Economic Review | NIESR Author(s): Chadha, J S | Journal: National Institute Economic Review Issue 252 | Publisher: Cambridge University Press

The Commentary in this Review has touched on the mix of monetary and fiscal policies regularly since the Brexit referendum. The timeless issues relating to the framework for monetary and fiscal policy and their appropriate degree of co-ordination have been exposed by the Covid-19 crisis. We have...

US and UK Labour Markets Before and During the Covid-19 Crash

We examine labour market performance in the US and the UK prior to the onset of the Covid-19 crash. We then track the changes that have occurred in the months and days from the beginning of March 2020 using what we call the Economics of Walking About (EWA) that shows a collapse twenty times faster...

Economic Crisis: Virtual Special Issue

Publication date: 3 Apr 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | Journal: National Institute Economic Review Issue Virtual issue | Publisher: Cambridge University Press

Our latest "virtual issue" of our Economic Review focussing on Economic Crisis

World overview: Forecast summary

Publication date: 6 Feb 2020 | Publication type: National Institute Economic Review | Theme: Macroeconomics | NIESR Author(s): Naisbitt, B, Boshoff, J, Hurst, I, Kara, A, Lenoel, C, Liadze, I, Mao, X, Thamotheram, C, Whyte, K | Journal: National Institute Economic Review Issue 251 | Publisher: Cambridge University Press

Global economic growth slowed again last year as increases in tariffs and uncertainty about future tariff impositions and their implications for production activity continued to have negative effects on industrial production, especially in the advanced economies, and global trade. With a weaker...

Stranded Assets and Sovereign States

There is evidence that the risk of stranded assets in the oil and gas sector is underpriced in financial markets. Publicly traded Western oil and gas companies are starting to write down assets, opening up the possibility that more rationalisation of value is likely to come. To the extent that...

The Changing Role of Carbon Pricing in the EU

Carbon pricing has been the most prominent climate change mitigation policy for the EU since the launch of its emissions trading system (ETS) in 2005. Since then, the context of international climate policy as well as of the socio-political and economical context of decarbonisation has changed...

India in the Coming ‘Climate G2’?

Publication date: 6 Feb 2020 | Publication type: National Institute Economic Review | External Author(s): Camuzeaux, J, Sterner, T, Wagner, G | JEL Classification: Q5, F5 | Journal: National Institute Economic Review Issue 251 | Publisher: Cambridge University Press

China and the United States are the two largest emitters of greenhouse gases, making them pivotal players in global climate negotiations. Within the coming decade, however, India is set to become the most important counterpart to the United States, as it overtakes China as the country with the most...

Introduction: The Economic Implications of Climate Change Mitigaton Policies

Publication date: 6 Feb 2020 | Publication type: National Institute Economic Review | NIESR Author(s): Holland, D, Young, G | Journal: National Institute Economic Review Issue 251 | Publisher: Cambridge University Press

The articles in this issue of the Review highlight some of the economic issues involved in acting to cut greenhouse gas emissions to a level consistent with the ambition to limit global temperature increases. Together they help explain why progress in tackling this “urgent problem”is likely to be...

Does intellectual property rights protection constitute a barrier to renewable energy? An econometric analysis

Publication date: 6 Feb 2020 | Publication type: National Institute Economic Review | External Author(s): Li, J, Omoju, O E, Zhang, J, Ikhide, E E, Lu, G, Lawal, A I, Ozue, V A | JEL Classification: O34, Q42, Q55, C23 | Journal: National Institute Economic Review Issue 251 | Publisher: Cambridge University Press

This study uses an econometric approach to investigate the role of IPR protection on renewable energy adoption using panel data of 102 countries at five-year intervals over the period 1990–2005. The Ginarte-Park index is used as a measure of the strength of intellectual property protection while...