Learning from forecast errors: the Bank’s enhanced approach to forecast evaluation (with James Hurley, Paul Labonne, David Latto, Harry Li, Andre Moreira, Joseph Oyegoke and Sumer Singh), Macro Technical Paper No. 6, 2026
The Bernanke Review and forecasting challenges of recent years have highlighted the importance of continuous learning from forecast errors. Following substantial investment by Bank staff, and alongside the publication of a new Forecast Evaluation Report in 2026, this paper provides technical detail on the Bank's enhanced forecast evaluation approach. We describe a wide range of evaluation techniques allowing us to characterise the Bank's forecast performance statistically, as well as to interrogate specific forecast errors in greater detail, including their economic drivers. Worked examples are provided throughout, focusing on a subset of macroeconomic variables relevant to monetary policy makers. The statistical techniques described in this paper are also implemented and published as part of a new Python package, to facilitate ongoing forecast evaluation and continued development of this toolkit.
Completed Fertility Effects of Family Policy Measures: Evidence from a Life-Cycle Model (with Karsten Reuss and Holger Stichnoth), Economics Bulletin, 2015, 35(3): 1726-1733
We estimate a structural life-cycle model of fertility and female labour supply and use it to evaluate the effects of a number of key family policy measures based on data for Germany. Parental leave benefits, child benefits and subsidized childcare are found to have substantial fertility effects. Without these measures, completed fertility is estimated to be lower by 6%, 7%, and 10%, respectively. Income tax splitting, which is fiscally expensive, reduces female labour supply but has a negligible effect on fertility.
Media coverage in Der Spiegel
Climate Change Mitigation: How Effective is Green Quantitative Easing? (with Marien Ferdinandusse, Alexander Ludwig and Carolin Nerlich)
We develop a two sector integrated assessment model with incomplete markets to analyze the effectiveness of green quantitative easing in complementing fiscal policies for climate change mitigation. We model green quantitative easing through a given outstanding stock of bonds held by a monetary authority and its portfolio allocation between a clean (green) and a dirty (brown) sector of production. Our key research question is whether the monetary authority can effectively contribute to a reduction of global damages caused by carbon emissions. Our findings show that green quantitative easing does not lead to a perfect crowding out of capital and thus has real effects in the long-run. Since green quantitative easing only indirectly affects the allocation of production to dirty and clean technologies and since its impact is capped by the (relatively small) private asset holdings of the monetary authority, it is, however, less effective in climate change mitigating than carbon taxes. We conclude that green quantitative easing might be a quantitatively important complement to fiscal policies in particular if governments only insufficiently coordinate on implementing green fiscal policies.
Profiled in Green Fiscal Policy Network, VoxEU, ECB Research Bulletin, SUERF Policy Brief
Demographic Change and Secular Trends in Interest Rates and Risk Premia
Demographic change lowers raw labor supply and leads to a relative abundance of physical capital, resulting in an increase of physical capital intensity in production. This leads to lower asset returns. However risk-free and risky returns are affected to a different extent. Both rates fall, but the decrease in the risk-free rate exceeds the decrease in the risky rate. The reasoning is that demographic change increases the share of old-age households with older households holding a larger share of their wealth in risk-free assets, as compared to younger households. The increase in demand for risk-free assets compared to risky assets puts downward pressure on risk-free asset prices and leads to an increase in the risk premium. I develop an overlapping generations model and quantify these effects for the US economy. Until 2050 I find that risky returns and the risk-free rate decrease by roughly 0.85 percentage points, and the risk premium increases by a mild 5.4 basis points. Allowing households to endogenously increase their human capital holdings, these figures reduce to 0.25 percentage points and 1.5 basis points, respectively.
Secular Stagnation? Growth, Asset Returns and Welfare in the Next Decades (with Christian Geppert and Alexander Ludwig)
Ongoing demographic change will lead to a relative scarcity of raw labor to the effect that output growth will be decreasing in the next decades, a secular stagnation. As physical capital will be relatively abundant, this decrease of output will be accompanied by reductions of asset returns. We quantify these effects for the US economy by developing an overlapping generations model with risky and risk-free assets. Without adjustments of human capital, risky returns decrease until 2035 by about 0.7 percentage points, and the risk-free rate by about one percentage point, leading to substantial welfare losses for asset rich households. Per capita output is reduced by 6%. Endogenous human capital adjustments strongly mitigate these effects. We conclude that human capital policies will be crucial in the context of labor shortages.
When studying the welfare effects of pay-as-you-go social security systems, efficiency gains due to risk-sharing are contrasted to welfare losses due to distortions. In related literature distorted saving decisions leading to crowding out of capital are identified as a major source for welfare losses. By and large many studies find that the costs of introducing social security outweigh the benefits.
But to my knowledge the literature so far disregards positive welfare effects of social security due to shifts in the asset portfolio of households. I study an overlapping generations model featuring idiosyncratic asset return risk and portfolio choice and find that social security benefits stipulate households to shift their savings to riskier assets with higher returns. On the one hand social security lowers the marginal propensity to save, but on the other hand it boosts returns on savings. The overall effect on savings and hence capital depends on which of these two effects dominates. Whether we encounter crowding in or out depends on the level of the risk-free rate and its elasticity with respect to changes in the quantity of the safe asset. Near-zero inelastic risk-free rates guarantee that crowding in prevails.
Gas2CPI - Scenario Analysis of UK Energy-Price-to-Inflation Dynamics (with Giulia Gardin, Shane Mahen and Dooho Shin)
This paper introduces Gas2CPI, a bottom-up modelling framework that maps wholesale crude oil, natural gas, and carbon price movements into consumer price inflation. The model captures key institutional features of the UK energy system - including regulated retail price caps, fixed-price components, and pass through between oil and petrol, and gas and electricity prices - and combines direct effects from household energy bills with indirect effects propagated through supply chains. Gas2CPI enables transparent scenario and counterfactual analysis, illustrating how energy shocks can generate persistent inflationary pressures across the CPI basket.
We apply the framework to the recent energy price surge following the Iran war. Using energy futures as of late March and excluding any 'second round' (or general equilibrium) effects - for example operating through wages - we estimate the impact of the energy shock on UK inflation. The initial inflation response is driven by higher household energy bills, while indirect supply chain effects and price adjustments elsewhere in the CPI basket generate more persistent dynamics. Oil price shocks pass through relatively quickly, whereas inflationary impacts from higher gas and electricity prices emerge with a lag.
Working paper available on demand
The Impact of the Net-Zero Transition on UK Productivity: A Conceptual Framework and New Evidence (with Maren Froemel, Philip Schnattinger, Prachi Srivastava and Ivan Yotzov)
TheUK’s Climate Change Act mandates an 80% cut in CO2 emissions by 2050 relative to 1990. Although CO2 emissions have already fallen by about 45%, further structural changes are essential for decarbonising the UK economy. This study examines the impact of this transformation on labour productivity, firm demographics and energy consumption. We assess the implications of the transition so far, as well as of the transformation ahead of us. Our investigation employs both empirical and structural approaches. The empirical strategy involves analyzing aggregate data, progressing to the division level, and concluding with an examination of individual firm behaviour.
Results indicate that two sectors drove the decarbonisation so far, electricity production and manufacturing. Shifting from coal to gas and renewables reduced emissions in electricity production, while the shrinking of the manufacturing sector reduced emissions in the latter. Reductions in energy intensity and increases in energy efficiency broadly balanced each other out in terms of productivity dynamics.
In the theoretical section, we leverage the empirical findings to inform a structural model, facilitating our forward-looking analysis.
Working paper available on demand
Energy Price Shocks in Production Networks: Evidence from the UK (with Shane Mahen)