Costas Milas's picture
Affiliation: 
University of Liverpool
Credentials: 
Professor of Economics

Voting history

Migration and the UK economy August 2014

Question 1: Do you agree that migration to the UK can be expected to be beneficial for the average income of current UK inhabitants in the upcoming decade?

Answer:
Neither agree nor disagree
Confidence level:
Not confident

UK House Prices and Macro-Prudential Policy July 2014

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Question 2: When housing-related risk is deemed excessive from the viewpoint of financial stability, do you agree that the correct response is to deploy macro-prudential tools, leaving interest rates focused on the needs of inflation and aggregate real activity?

 
Answer:
Disagree
Confidence level:
Confident
Comment:
Would macro-prudential policy work? From a statistical point of view, growth of house prices “Granger causes” (i.e. precedes) growth of mortgage debt; the opposite is not true. Indeed, this was also acknowledged by Ben Broadbent, External MPC Member (back in a March 2012 speech). This suggests to me that any macro-prudential measures to restrict the growth of mortgage debt and put a lid on house prices would be ineffective. So, to the extent we are worried about house prices, we should be looking at raising interest rates. With this in mind, would it not be much more effective to merge the Monetary Policy Committee (MPC) and the Financial Policy Committe (FPC) since their duties largely overlap?

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Question 1: Do you agree it is time for more robust policy action to prevent a build-up of excessive housing-related risk?

 

 
Answer:
Agree
Confidence level:
Confident
Comment:
Nationwide reports house prices since 1952. In 2014Q1, annual house price inflation stood at 9.2% (compared with the 8.1% average of the last 62 years). So, a bit of difference (albeit small) there. Although London house prices are "taking off" at an annual average of 18% (twice as much as the historical average; Nationwide provides regional data from 1973 onwards) house prices in North, North West and Yorks&Hside are also growing strongly (but still remain 1-2 percentage points below their historical growth rates). What happens in real terms? In 2014Q1, UK real house price growth (adjusted for RPI inflation) grew at an annual average of 6.6%, well beyond the long-run average of 2.6%. This is the highest growth (in real terms) since the last quarter of 2004 (when annual real house price growth “hit” 10.4%). So, YES, we should be worried about house prices.

Economic Consequences of an Independent Scotland June 2014

Question 2

Assuming that Scotland becomes an independent country, do you agree that the UK government's position of ruling out a monetary union is in the economic interests of the continuing UK? 

Answer:
Agree
Confidence level:
Very confident
Comment:
You cannot have an effective union without common fiscal and monetary policy. The rest of the UK might also want to rule out a currency union due to the risk of a credit rating downgrade. This is indeed a worry but (in my view) not a big one. Let me elaborate. Moody’s credit rating agency noted (on May the 1st) the possibility of downgrading Scotland (in case of independence with a currency union in place) at the same time while placing the Rest of the UK on the "credit negative" monitor. Moody's appears tempted to downgrade both Scotland and the Rest of the UK on a matter of economic policies following from their very democratic agreement to hold a referendum. In such scenario, the Rest of the UK will NOT necessarily face increasing borrowing costs. Investors will hopefully turn their back to Moody’s (or any other rating agency) since they will realise that Moody’s is in effect placing democracy in action (the referendum) on the “credit negative” monitor.

Question 1

Do you agree that that Scotland would better off in economic terms as an independent country?

Answer:
Disagree
Confidence level:
Confident
Comment:
Whether (or not) a currency union is in place, Scotland should not be better off on its own. Yet, if Scotland goes on its own, Mr. Salmond is telling us that Scotland will find it "easy" to renegotiate EU entry. So, if BREXIT occurs in 2017, will Scotland continue its currency union with the rest of the UK (assuming there is one) at the same time while remaining in the EU? In other words, will Scotland be an independent country sharing monetary policy with the rest of the UK while diverging in terms of fiscal and “external relations” policies? How attractive...

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