Measuring the permanent costs of Brexit

We analyse the costs of Brexit. The results show that by 2030 a hard Brexit would reduce cumulative GDP growth by 18 percentage points compared to a situation where the UK continued its EU membership. The economic damage in our FTA and soft Brexit scenarios is less severe than in our hard Brexit scenario, although it will still cost the UK economy roughly 12.5 percentage points and 10 percentage points of cumulative GDP growth by 2030, respectively. We find much larger negative effects than most existing studies that use macroeconometric modelling to assess the effects of Brexit.

Export pricing and the macroeconomic effects of US import tariffs

We modify NiGEM in order to study the macroeconomic effects of imposing import tariffs in the US under different assumptions regarding the long-run price setting behaviour of exporters. Overall, the macroeconomic implications in the US resemble the impact of a cost shock or adverse supply shock as prices increase while output declines. Due to exchange rate movements and changes in the prices of traded goods, prices and output in other economies tend to move in the same direction.

The import content of expenditure components and the size of international spillovers

For a large number of countries, we augment the specification of import demand in NiGEM by accounting for different import contents of individual expenditure components. Three examples illustrate that these changes have important implications for model outcomes. In the case of the recently enacted US tax reform and in a ‘hard landing’ scenario for China, spillovers become more pronounced while the domestic effects turn out more muted than in the default specification. The reverse is true for the ramifications of a public investment push in Germany.

Using NiGEM in uncertain times: Introduction and overview of NiGEM

This paper introduces a special issue of the Review on how the National Institute Global Econometric Model (NiGEM) is being used to navigate uncertain times. NiGEM is the leading global macroeconomic model, used by both policy-makers and the private sector across the globe for economic forecasting, scenario building and stress testing. The paper summarises the main features of NiGEM and describes some standard model simulations to illustrate how the model responds to monetary, fiscal and technology shocks.