Hostname: page-component-8448b6f56d-c4f8m Total loading time: 0 Render date: 2024-04-17T06:16:04.985Z Has data issue: false hasContentIssue false

Macroeconomic Modelling at the Institute: Hopes, Challenges and a Lasting Contribution

Published online by Cambridge University Press:  01 January 2020

Ray Barrell*
Centre for Macroeconomics, LSE; Brunel University London
Andy Blake*
Bank of England
Garry Young*


The Institute is a world leader in macroeconomic modelling and forecasting. It has produced quarterly economic forecasts for around sixty years, supported by macroeconomic models. The aim of the original builders of macroeconomic models was to transform understanding of how economies worked and use that knowledge to improve economic policy. In the early years, when computers were rare, macroeconomic modelling was a new frontier and Institute economists were among the first to produce a working model of the UK economy. It is remarkable how quickly models were being used to produce forecasts, assess policy and influence the international macroeconomic research agenda. The models built at the Institute were mainstream in the sense that they followed the contents of standard macroeconomic textbooks, developed with the subject, and fitted the facts as they were known at the time. There were continual improvements in understanding as the subject developed in response to new ideas and developments in the global economy. This article celebrates the development of macroeconomic modelling at the Institute and the contribution it has made to public life.

Research Articles
Copyright © 2018 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


We are grateful to Jagjit Chadha for comments on an earlier draft and to all current and former colleagues who have contributed to the development of macroeconomic modelling at the Institute. This paper reflects the views of the authors and should not be considered to represent those of the Bank of England or any of its policy committees.


Anderton, R. and Barrell, R. (1995), ‘The ERM and structural change in European labour markets: a study of 10 countries’, Weltwirtschaftliches Archiv, Band 131, Heft 1.CrossRefGoogle Scholar
Armstrong, A. and Portes, J. (2016), ‘The economic consequences of leaving the EU’, National Institute Economic Review, 236, May pp. 26.CrossRefGoogle Scholar
Barrell, R. (2001), ‘Forecasting the world economy’, in Hendry, D.F. and Ericsson, N.R., Understanding Economic Forecasts, Cambridge, Mass.: MIT Press, pp. 152–73.Google Scholar
Barrell, R., Becker, B., Byrne, J., Gottschalk, S., Hurst, I. and van Welsum, D. (2004), ‘Macroeconomic policy in Europe: experiments with monetary responses and fiscal impulses’, Economic Modelling, 21, pp 877931.CrossRefGoogle Scholar
Barrell, R., Byrne, J. and Dury, K. (2003), ‘The implications of diversity in consumption behaviour for the choice of monetary policy rules in Europe’, Economic Modelling, 20, pp. 275–99.CrossRefGoogle Scholar
Barrell, R. and Davis, P. (2007), ‘Financial liberalisation, consumption and wealth effects in 7 OECD countries’, Scottish Journal of Political Economy, May, 54, pp. 254–67.CrossRefGoogle Scholar
Barrell, R., Davis, P., Fic, T., Holland, D., Kirby, S., and Liadze, I. (2009), ‘Optimal regulation of bank capital and liquidity: how to calibrate new international standards’, FSA Occasional Paper no. 38, October.Google Scholar
Barrell, R., Davis, P., Karim, D. and Liadze, I. (2010), ‘Bank regulation, property prices and early warning systems for banking crises in OECD countries’, Journal of Banking and Finance, 34, pp. 2255–64.CrossRefGoogle Scholar
Barrell, R., Davis, P. and Pomerantz, O. (2006), ‘Costs of financial instability, household-sector balance sheets and consumption’, Journal of Financial Stability, 2, 2, pp. 194216.CrossRefGoogle Scholar
Barrell, R. and Dury, K. (2000a), ‘Choosing the regime: macroeconomic effects of UK entry into EMU’, Journal of Common Market Studies, 30 (4).Google Scholar
Barrell, R. and Dury, K. (2000b), ‘An evaluation of monetary targeting regimes’, National Institute Economic Review, 174, October.CrossRefGoogle Scholar
Barrell, R., Dury, K. and Hurst, I. (2003), ‘International monetary policy co-ordination: an evaluation using a large econometric model’, Economic Modelling, 20, pp. 507–27.CrossRefGoogle Scholar
Barrell, R., Fic, T. and Holland, D. (2009), ‘Evaluating policy reactions to the financial crisis’, National Institute Economic Review, 207, January, pp. 3942.CrossRefGoogle Scholar
Barrell, R., Fic, T. and Liadze, I. (2009), ‘Fiscal policy effectiveness in the banking crisis’, National Institute Economic Review, 207, January, pp. 4350.CrossRefGoogle Scholar
Barrell, R., Gottschalk, S., Kirby, S. and Orazgani, A. (2009), ‘Projections of migration inflows under alternative scenarios for the World Economy’, Department of Communities and Local Government economics paper No. 3.Google Scholar
Barrell, R., Hall, S.G. and Hurst, A.I. (2006), ‘Evaluating policy feedback rules using the joint density function of a stochastic model’, Economics Letters, 93 (1), October, pp. 15.CrossRefGoogle Scholar
Barrell, R. and Holland, D. (2010), ‘Fiscal and financial responses to the economic downturn’, National Institute Economic Review, 211, January, pp. R5162.CrossRefGoogle Scholar
Barrell, R., Hurst, I. and Mitchell, J. (2007), ‘Uncertainty bounds for cyclically adjusted budget balances’, in Larch, M. and Martins, L.N. (eds), Fiscal Indicators, European Commission, Brussels, pp. 187206.Google Scholar
Barrell, R., Kirby, S. and Orazgani, A. (2011), ‘The macroeconomic impact from extending working lives’, Department for Work and Pensions Economics Paper no. 95.Google Scholar
Barrell, R. and Pain, N. (1997), ‘Foreign direct investment, technological change, and economic growth within Europe’, Economic Journal, 107, pp. 1770–6.CrossRefGoogle Scholar
Barrell, R. and Pina, A. (2004), ‘How important are automatic stabilisers in Europe?’, Economic Modelling, 21, I, pp. 135.CrossRefGoogle Scholar
Barrell, R., Riley, R. and Fitzgerald, J. (2010), ‘EU enlargement and migration: assessing the macroeconomic impacts’, Journal of Common Market Studies, March.CrossRefGoogle Scholar
Barrell, R. and Sefton, J. (1997), ‘Fiscal policy and the Maastricht solvency criteria’, Manchester School, June, 65(3) pp. 259–79.CrossRefGoogle Scholar
Barrell, R. and Weale, R. (2009), ‘The economics of a reduction in VAT’, Fiscal Studies, 30, 1, pp. 1730.CrossRefGoogle Scholar
Barrell, R. and Weale, R. (2010), ‘Fiscal policy, fairness between generations, and national savingOxford Review of Economic Policy, 26(1) pp. 87116.CrossRefGoogle Scholar
Blake, A. (1996), ‘Forecast error bounds by stochastic simulation’, National Institute Economic Review, 156, pp. 72–9.CrossRefGoogle Scholar
Blake, A. and Westaway, P. (1994), ‘Targeting inflation with nominal interest rates’, NIESR WP No. 70.Google Scholar
Blake, A. and Westaway, P. (1996), ‘Credibility and the effectiveness of inflation targeting regimes’, Manchester School, LXIV, pp. 2850.Google Scholar
Blanchard, O. (2018), ‘On the future of macroeconomic models’, Oxford Review of Economic Policy, 34 (1–2), pp. 4354.CrossRefGoogle Scholar
Britton, A. (1983), Employment, Output and Inflation: the National Institute Model of the British Economy, Heinemann.Google Scholar
Carreras, O., Davis, P., Hurst, I., Liadze, I., Piggott, R. and Warren, J. (2018), ‘Implementing macroprudential policy in NiGEM’, NIESR Discussion Paper No. 490.Google Scholar
Chadha, J. (2017), ‘Why forecast?’, National Institute Economic Review, 239, F49.CrossRefGoogle Scholar
Ebell, M., Hurst, I. and Warren, J. (2016), ‘Modelling the long-run economic impact of leaving the European Union’, Economic Modelling, 59, pp. 196209.CrossRefGoogle Scholar
Fuhrer, J. and Moore, G. (1995), ‘Inflation persistence’, Quarterly Journal of Economics, 109, pp. 197230.Google Scholar
Hantzsche, A., Lopresto, M. and Young, G. (2018), ‘Using NiGEM in uncertain times: introduction and overview of NiGEM’, National Institute Economic Review, 244, R114.CrossRefGoogle Scholar
Jones, K. (1998), Sixty Years of Economic Research: A Brief History of the National Institute of Economic and Social Research 1938–1998, NIESR Occasional Paper No. 52.Google Scholar
Kirby, S., Paramaguru, K. and Warren, J. (2015), ‘The accuracy of NIESR's GDP growth forecasts’, National Institute Economic Review, 232, F4147.CrossRefGoogle Scholar
Mitchell, J. (2005), ‘The National Institute density forecasts of inflation’, National Institute Economic Review, July.CrossRefGoogle Scholar
Pain, N., Weale, M. and Young, G. (1997), ‘Britain's fiscal problems’, Economic Journal, 107(443), July, pp. 1142–56.CrossRefGoogle Scholar
Pain, N. and Young, G. (2004), ‘The macroeconomic impact of UK withdrawal from the EU’, Economic Modelling, 21(3), pp. 387408.CrossRefGoogle Scholar
Riley, R. and Young, G. (2007), ‘Skill heterogeneity and equilibrium unemployment’, Oxford Economic Papers, 59(4), pp. 702–25.CrossRefGoogle Scholar
Surrey, M. (1971), The Analysis and Forecasting of the British Economy, NIESR Occasional Paper No. 25, Cambridge: Cambridge University Press.Google Scholar
Taylor, J.B. (1993), ‘Discretion versus policy rules in practice’, Carnegie-Rochester Conference Series on Public Policy, 39, pp. 195214.CrossRefGoogle Scholar
Vines, D. and Wills, S. (2018), ‘Rebuilding macroeconomic theory’, Oxford Review of Economic Policy, 34, 12.CrossRefGoogle Scholar
Weale, M. (1998), ‘Foreword’, in Jones (1998).Google Scholar
Weale, M., Blake, A., Christodoulakis, N., Meade, J. and Vines, D. (1989), Macroeconomic Policy: Inflation, Wealth and the Exchange Rate, Unwin Hyman.Google Scholar
Westaway, P. (1995), ‘The role of macroeconomic models in the policy design process’, National Institute Economic Review, February.CrossRefGoogle Scholar
Worswick, D. (1971), ‘Introduction’ in Surrey (1971).Google Scholar