Commentary on The challenges of estimating potential output in real time

Economic development ; Economic conditions

The distribution of wealth in the population aged 50 and over in England

The tables in this paper present a description of the distribution of wealth amongst those aged 50 and over in England in 2002/3, with the analysis split by a series of different factors. These include: age, education, income, social, with the analysis split by a series of different factors. These include: age, education, income, social class, housing tenure, self-reported health and self-reported disability

Interim evaluation of saving gateway 2

The Saving Gateway is a government initiative aimed at encouraging savings behaviour among people who do not usually save. Each pound placed into a Saving Gateway account is matched by the government at a certain rate and up to a monthly contribution limit. Matching provides a transparent and understandable incentive for eligible individuals to place funds in an account. An initial pilot of the Saving Gateway - SG1 - has already been conducted and evaluated. In the December 2004 Pre-Budget Report, the Chancellor of the Exchequer announced a new, larger scale, pilot of the Saving Gateway - SG2. Almost 21,500 individuals have opened SG2 accounts across six areas of England. The design of these accounts - in terms of the match rate and monthly contribution limit - varies across these areas. Alongside the financial incentive to place funds in a SG2 account, the pilots also offer financial education

Better prepared for retirement? Using panel data to improve wealth estimates of ELSA respondents

We compare the key assumptions underpinning estimates of the pension wealth of ELSA respondents to outcomes over the period from 2002–03 to 2004–05. We find that many of these assumptions have, on average, proved cautious or reasonable. Improving pension wealth calculations using this new evidence makes little difference to the distribution of pension wealth. Previous estimates of retirement resources also considered net financial, physical and housing wealth. Particularly cautious, ex-post, was the assumption that net housing wealth would remain constant in real terms. We find that average housing wealth has risen by almost 40% in nominal terms over just two years, which is in line with growth in the Nationwide House Price Index. This large increase in house prices boosts estimates of total wealth across the entire distribution of wealth. Previous research showed that once half of current net housing wealth was included as a retirement resource 12.6% of employees approaching retirement were estimated to have resources below the Pensions Commission’s definition of adequacy. We show that taking into account the high growth in house prices between 2002–03 and 2004–05 reduces this to 10.9%, and that it would fall by a further 1.2 percentage points if house prices were to grow by 2½% a year in real terms in the future

The UK public finances: ready for recession?

Summary Neither the current Labour government nor the previous Conservative one can look back over their respective terms of office as periods of great success in fiscal management. Both started by strengthening their underlying budget balances for three years after taking office, but both then allowed them to drift steadily back into the red. This meant that they were already borrowing significant amounts when the onset of recession required them to borrow more. Labour is entering this recession with a similar structural budget deficit to the one that it inherited from the Conservatives, but with a smaller underlying debt. It remains to be seen whether the structural budget deficit will deteriorate as far under Labour as it did under the Conservatives, but debt is very likely to rise above the peak it recorded under the Conservatives (even without the impact of recent bank nationalisations and recapitalisations). Labour recorded a similar structural budget deficit in the year before this recession to that which the Conservatives recorded in the year before the last. However, the structural deficit appears to have deteriorated more sharply in the early phase of the downturn than it did under the Conservatives and as a result is set to be higher in the first year of recession than it was under the Conservatives. This largely reflects the particular impact of the credit crunch and falls in the stock market and housing market, rather than budget decisions. Labour is also going into the recession with a significantly higher level of debt than the Conservatives did. Turning to the international context, we are entering the current recession with one of the largest structural budget deficits in the industrial world and a debt level that may be among the smallest in the G7 but which is larger than that of most industrial countries. We have done less to reduce our structural budget deficit and less to reduce our debt than most other industrial countries since Labour came to office

Optimal Policy Projections

We outline a method to provide advice on optimal monetary policy while taking policymakers' judgment into account. The method constructs Optimal Policy Projections (OPPs) by extracting the judgment terms that allow a model, such as the Federal Reserve Board's FRB/US model, to reproduce a forecast, such as the Greenbook forecast. Given an intertemporal loss function that represents monetary policy objectives, OPPs are the projections - of target variables, instruments, and other variables of interest -that minimize that loss function for given judgment terms. The method is illustrated by revisiting the Greenbook forecasts of February 1997 and November 1999, in each case using the vintage of the FRB/US model that was in place at that time. These two particular forecasts were chosen, in part, because they were at the beginning and the peak, respectively, of the late 1990s boom period. As such, they differ markedly in their implied judgments of the state of the world, and our OPPs illustrate this difference. For a conventional loss function, our OPPs provide significantly better performance than Taylor-rule simulations.

H\"older Stable Recovery of Time-Dependent Electromagnetic Potentials Appearing in a Dynamical Anisotropic Schr\"odinger Equation

We consider the inverse problem of H\"oldder-stably determining the time- and space-dependent coefficients of the Schr\"odinger equation on a simple Riemannian manifold with boundary of dimension $n\geq2$ from knowledge of the Dirichlet-to-Neumann map. Assuming the divergence of the magnetic potential is known, we show that the electric and magnetic potentials can be H\"older-stably recovered from these data. Here we also remove the smallness assumption for the solenoidal part of the magnetic potential present in previous results

Optimal Policy Projections

We outline a method to provide advice on optimal monetary policy while taking policymakers’ judgment into account. The method constructs optimal policy projections (OPPs) by extracting the judgment terms that allow a model, such as the Federal Reserve Board staff economic model, FRB/US, to reproduce a forecast, such as the Greenbook forecast. Given an intertemporal loss function that represents monetary policy objectives, OPPs are the projections — of target variables, instruments, and other variables of interest — that minimize that loss function for given judgment terms. The method is illustrated by revisiting the economy of early 1997 as seen in the Greenbook forecasts of February 1997 and November 1999. In both cases, we use the vintage of the FRB/US model that was in place at that time. These two particular forecasts were chosen, in part, because they were at the beginning and the peak, respectively, of the late 1990s boom period. As such, they differ markedly in their implied judgments of the state of the world in 1997 and our OPPs illustrate this difference. For a conventional loss function, our OPPs provide significantly better performance than Taylor-rule simulations.

Occupational pension value in the public and private sectors

It is well known that in the UK defined benefit pensions are more prevalent in the public sector than in the private sector. Furthermore, we find that the average value of accrual to members of both defined benefit pensions and defined contribution pensions is lower in the private sector than in the public sector. As a result of both these factors, we find that the average value of pension accrual is much higher in the public sector than in the private sector. Due to the long-running shift away from defined benefit pensions to less generous workplace defined contribution pensions in the private sector continuing between 2001 and 2005 the difference in average pension accrual between the sectors increased over this period. While on average over this period earnings in the public sector grew 3.5% faster than in the private sector, including pension accrual increases this difference by one-third to 4.7%. We simulate a plausible reform to the public sector defined benefit pensions - an increase in the normal pension age from 60 to 65 for future pension accrual of all current members. We find that, had this reform been implemented between 2001 and 2005, average growth in total remuneration over this period in the public sector would actually have been almost the same as that in the private sector.