Published by: Organisation Office for Budget Responsibility
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Key Take Aways
The UK OLG (Overlapping Generations) model captures detailed household behaviour over time, including saving, consumption, and labour supply decisions across life stages, providing a robust tool for long-term macroeconomic and fiscal analysis.
Developed jointly by the OBR and HM Treasury, the model complements existing forecasting tools by explicitly considering demographic shifts, policy impacts, and shocks affecting different age groups differently.
The model's micro-founded, general equilibrium framework enables analysis of how policy or shocks influence household decisions, macro aggregates, and the government’s fiscal sustainability.
It incorporates stochastic income shocks, generating within-generation inequalities and more realistic savings behaviours, including life-cycle and precautionary savings.
Calibration to UK-specific data, including demographics, i...
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