My research focuses on regional and international applied General Equilibrium (GE) modelling. My GE research is in:
Quantifying trade policy impacts
Intertemporal consumption modeling such as habit formation and reference dependence models
Energy Policy Analysis
Monopolistic Competition model applications
I am also interested in Macroeconomic policies in the European Union. My research in this area is in:
Asymmetric transmission of Monetary Policy in Monetary Unions
Economic Convergence in the European Union
I have also assisted research in:
Quantifying the distributional effects of tax policies in Scotland compared to England
Quantifying the distributional effects of student loan policies in Scotland compared to England
The impact of the new Northern Ireland protocol: can Northern Ireland enjoy the best of both worlds? with Gioele Figus (November 2021).
In: Regional Studies.
Abstract: From the 1 January 2021 the new Protocol on Northern Ireland (NI) regulates NI’s trade with the European Union (EU) and Great Britain (GB). These rules imply divergence between trade arrangements in NI and GB creating an unprecedented situation where trade frictions arise between two regions of the same country. In this paper we use a multi-sector economic model to capture the impact that potential non-tariff barriers and tariffs will have on trade in NI. Simulation results demonstrate that a weaker relation between GB and the EU will have a greater negative impact on the NI economy. However, this may be reduced by the ability of NI firms to substitute intermediate inputs from GB for EU imports.
How should governments respond to energy price crises? A horse-race between fiscal policies. with Gioele Figus (January 2024).
In: Energy Economics.
Abstract: This paper compares the welfare and distributional implications of fiscal policies aimed at reducing a sudden and significant increase in the price of energy. A dynamic computable general equilibrium model with households disaggregated by income groups is used to compare the effectiveness of five energy price-reducing fiscal policies. The policies are assessed under two financing options, pure government debt and a mix of debt and windfall taxation on energy companies. Results from simulations demonstrate that targeted demand-side policies are more effective at reducing overall energy-driven inflation and increasing welfare. Supply-side policies and mixed demand and supply policies achieve a smaller reduction in the consumer price index but are more expansionary. Financing the policies partly through windfall taxation does not impact the ranking of policies but it delivers better distributional outcomes and higher welfare. The results motivate the use of windfall taxation if governments face high interest rates on debt financing and/ or if households care sufficiently about the provision of public goods. The optimal policy is likely a mix of supply-side measures such as production tax reductions or general price subsidies and either targeted energy price subsidies or targeted income subsidies financed where possible through windfall taxation.
The UK wage curve puzzle. Has the wage curve flattened since the 2008 financial crisis? (this version: January 2024).
Abstract: This paper demonstrates that the wage curve relationship has both weakened and flattened in the UK between 1992 and 2019. Using the combined British Household Panel Survey and Understanding Society data and Annual Population survey data, unemployment elasticities of wages range from -0.01 to -0.04 between 1992 and 2019 and flatten to values close to 0 or even positive in the 2010s. Neither discouraged workers nor underemployed workers are found to explain the flattening wage curve in contrast to evidence from the United States. A lower unemployment elasticity of wages in the UK implies larger output volatility and more detrimental impacts of negative trade shocks in the long run.
Rational, habit formation or reference-dependent consumption behaviour: What consumption theory should we apply to General Equilibrium models? (this version: January 2024).
Abstract: This paper derives the first computationally feasible, micro-founded and dynamic reference dependence consumption model within a Computable General Equilibrium framework. This contribution provides an alternative consumption method to the often criticised neoclassical assumptions and myopic assumptions used in the Computable General Equilibrium literature. More, this method nests the habit formation method popularised in the Dynamic Stochastic General Equilibrium literature. Using this reference dependence method, it can be shown that consumption responses to adverse shocks will be hump-shaped as predicted by habit formation consumption models. The key qualitative difference between the habit formation and the reference dependence model is in the shape of the hump. This will depend on the degree of loss aversion.
A multifaceted exploration of real economic convergence trends since 1995 in the EU (this version: January 2024).
Abstract: This paper investigates real economic convergence trends in the EU between 1995 and 2017 paying special attention to the 2008-17 sub-period. To do this, three hypotheses are tested between 1995 and 2017 and two sub-periods in this range. These are the unconditional, conditional and club convergence hypotheses. These hypotheses are tested using a multifaceted statistically rigorous methodology including standard tests such as β- and σ-convergence regression tests, adapted to capture trend changes, and an original pairwise-convergence ratio method. With the help of these tools, three central conclusions are drawn. First, there is unambiguous evidence of real economic convergence in the EU between 1995 and 2017 and in the two sub-periods both in the unconditional and conditional sense. Second, there is strong evidence of a convergence slowdown in the EU after 2007 in the conditional and unconditional sense despite some mixed evidence in the conditional β-convergence regressions. Third, there is little evidence of club convergence in the EU15 in the 2008-17 sub-period. In fact, some evidence suggests that the EU15 may have been diverging after 2007.
How do demand and supply side asymmetries affect the optimal policy mix in a monetary union? A game theory perspective. (this version: April 2023).
Newspaper articles:
Brexit and Scottish exports? A negative shock? with Gioele Figus, Peter McGregor and Graeme Roy (December 2023).
In: Centre for Inclusive Policy (CITP) blog.
New Brexit deal will be better for Northern Ireland’s economy than the protocol, research suggests with Gioele Figus (March 2023).
In: The Conversation.
Blogs:
The New Northern Ireland Protocol: is Northern Ireland stuck in the middle? with Gioele Figus (November 2021).
In: Fraser of Allander Institute blog.
The macroeconomic impacts of the new protocol on Northern Ireland and how they can be mitigated with Gioele Figus (December 2021).
In: LSE British Politics and Policy blog.
What are the economic implications of the Windsor Framework? with Gioele Figus and Graeme Roy (April 2023).
In: Centre for Inclusive Policy (CITP) blog.
Policy report contributions:
Fraser of Allander Institute: Scotland’s Budget Report 2018 (developed the FAI micro-simulation model and loan-repayment models).
FAI Economic Commentary, 2021 Q4 (this cites the work completed with Gioele Figus on the Northern Ireland protocol).