We in this paper employ a penalized moment selection procedure to identify valid and relevant moments for estimating and testing forecast rationality within the flexible loss framework proposed by Elliott et al. (2005). We motivate the selection of moments in a high-dimensional setting, outlining the fundamental mechanism of the penalized moment selection procedure and demonstrating its implementation in the context of forecast rationality, particularly in the presence of potentially invalid moment conditions. The selection consistency and asymptotic normality are established under conditions specifically tailored to economic forecasting. Through a series of Monte Carlo simulations, we evaluate the finite sample performance of penalized moment estimation in utilizing available instrument information effectively within both estimation and testing procedures. Additionally, we present an empirical analysis using data from the Survey of Professional Forecasters issued by the Federal Reserve Bank of Philadelphia to illustrate the practical utility of the suggested methodology. The results indicate that the proposed post-selection estimator for forecaster’s attitude performs comparably to the oracle estimator by efficiently incorporating available information. The power of rationality and symmetry tests leveraging penalized moment estimation is substantially enhanced by minimizing the impact of uninformative instruments. For practitioners assessing the rationality of externally generated forecasts, such as those in the Greenbook, the proposed penalized moment selection procedure could offer a robust approach to achieve more efficient estimation outcomes.

This is the story of the Princeton Wine Group, a group whose membership has been relatively constant for almost 40 years. This group has enjoyed 244 blind tastings involving 1,708 different wines. A statistical analysis was performed at each tasting examining whether participants ranked the quality of wines similarly and whether the preferences of the group were correlated with several variables including professional wine ratings and the prices of the wine. The article concludes with a discussion of lessons learned from a lifetime of wine tastings.

Against the background of the European Commission’s reform plans of the Stability and Growth Pact, this paper uses NiGEM to simulate the macroeconomic implications of re-applying the fiscal rules in 2024. Next to returning to the unreformed rules, the most prominent options include an expenditure rule. Our results indicate that re-applying the unreformed rules leads to severe cuts in public spending. An expenditure rule would, however, not necessarily alleviate the fiscal adjustment burden. Instead, our simulations show that great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way.

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 threatened the European Union with tariffs on cars and car parts because of Canadian seafood being subject to lower import duties. As simulations with NiGEM show, a further escalation of the transatlantic trade conflict has the potential to slow down economic growth significantly in the countries involved. This is a considerable risk given the fact that the countries have to cope with the enormous negative effects of the pandemic shock. Furthermore, the damage caused by the trade conflict depends on the extent to which the affected countries use fiscal policy to stabilise their economies.

We examine the net benefits of social distancing to slow the spread of COVID-19 in USA. Social distancing saves lives but imposes large costs on society due to reduced economic activity. We use epidemiological and economic forecasting to perform a rapid benefit–cost analysis of controlling the COVID-19 outbreak. Assuming that social distancing measures can substantially reduce contacts among individuals, we find net benefits of about $5.2 trillion in our benchmark case. We examine the magnitude of the critical parameters that might imply negative net benefits, including the value of statistical life and the discount rate. A key unknown factor is the speed of economic recovery with and without social distancing measures in place. A series of robustness checks also highlight the key role of the value of mortality risk reductions and discounting in the analysis and point to a need for effective economic stimulus when the outbreak has passed.

We construct and parameterize an overlapping generations model for an open economy with individuals who differ in innate ability. Key endogenous variables are hours worked, investment in human and physical capital, and per capita growth. The model replicates important data in Belgium since 1960 remarkably well. Simulating it, we observe that behavioral adjustments by households and firms contribute to reverse the negative arithmetical effect of future demographic change on per capita growth. Individuals work and study more. However, with unchanged policies, there remains a net negative effect on annual per capita growth of almost 0.3%-points on average in the next 25 years. This is mainly due to adverse consequences of reduced fertility and a declining working-age population on (the return to) physical capital investment. Model projections also point to rising income inequality induced by demographic change. Differences in the capacity of individuals to respond to increasing life expectancy by investing in education, and by saving, are key.

Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged asset rich households. This paper takes the perspective of the three demographically oldest European nations – France, Germany and Italy – to address three important adjustment channels to dampen these detrimental effects of aging in these countries: investing abroad, endogenous human capital formation, and increasing the retirement age. Our quantitative finding is that endogenous human capital formation in combination with an increase in the retirement age has strong implications for economic aggregates and welfare, in particular in the open economy. These adjustments reduce the maximum welfare losses of demographic change for households alive in 2010 by about 2.2 percentage points in terms of consumption equivalent variation.

This paper uses an OLG-CGE model for the UK to illustrate the long-term effect of migration on the economy. We use the current Conservative Party migration target to reduce net migration “from hundreds of thousands to tens of thousands” as an illustration. Achieving this target would require reducing recent net migration numbers by a factor of about 2. We undertake a simulation exercise to compare a baseline scenario, which incorporates the principal 2010-based ONS population projections, with a lower migration scenario, which assumes that net migration is reduced by around 50 per cent. The results show that such a significant reduction in net migration has strong negative effects on the economy. By 2060 the levels of both GDP and GDP per person fall by 11.0 per cent and 2.7 per cent respectively. Moreover, this policy has a significant impact on public finances. To keep the government budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario.

The aim and scope of this paper is to isolate the effects of population ageing in the context of potential Scottish independence. A dynamic multiregional Overlapping Generations Computable General Equilibrium (OLG-CGE) model is used to evaluate the two scenarios. The status quo scenario assumes that Scotland stays part of the UK and all government expenditures associated with its ageing population are funded on a UK-wide basis. In the independence scenario, Scotland and the rest of the UK pay for the growing demands of their ageing populations independently. The comparison suggests that Scotland is worse off in the case of independence. The effective labour income tax rate in the independence scenario has to increase further compared with the status quo scenario. The additional increase reaches its maximum in 2035 at 1.4 percentage points. The additional rise in the tax rate is non-negligible, but is much smaller than the population ageing effect (status quo scenario) which generates an increase of about 8.5 percentage points by 2060. The difference for government finances between the status quo and independence scenarios is thus relatively small.

The paper discusses the effects on growth of a systemic banking crisis as a result of debt defaults. These effects will come from the impact of credit rationing on consumption and credit and from the impacts of a significant rise in the spread between lending and borrowing rates for both producers and consumers. The analysis uses the dynamic stochastic general equilibrium version of the National Institute global model. The paper also investigates the impact on output of a permanent, regulation induced, rise in margins in the financial sector, taking into account the impacts of regulation on equity market valuations.

This paper compares the National Institute of Economic and Social Research (NIESR) forecasts for output, inflation and key public sector finance variables against the corresponding forecasts from HM Treasury (HMT), the Bank of England (Bank) and the Institute for Fiscal Studies (IFS). We find that NIESR outperforms, on average, other major bodies in its forecasts for output and in particular inflation where simple scores are used. It also performs well on the forecasting of the government current budget surplus but not public sector net borrowing. Statistical estimates of accuracy provide a less clear picture but their reliability is blighted by the small sample size.