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

Voting history

Brexit: the potential of a financial catastrophe and long-term consequences for the UK financial sector

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Question 1: Do you agree that there would be substantial negative long-term consequences for the UK financial sector if the UK were to leave the EU?

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Answer:
Agree
Confidence level:
Confident
Comment:
Have you got permission from the "Leavers" before asking these types of questions? They will say that CFM is EU funded.

The future role of (un)conventional unconventional monetary policy

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Question 2:  Do you agree that central banks should operationalise the use of these alternative tools of unconventional monetary policy for use either in the near term, or in the future, as economic conditions warrant?

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Answer:
Disagree
Confidence level:
Confident

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Question 1: Do you agree that central banks should continue to use the unconventional tools of monetary policy deployed in response to the global financial crisis as part of monetary policy under normal economic conditions?

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Answer:
Disagree
Confidence level:
Confident

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Agree
Confidence level:
Confident
Comment:
In the current environment of "low" unemployment, the rest of the workers (who form the majority as they are not on the minimum wage) will respond to the NLW developments by bargaining more lively in order to restore part of their “wage differentials”. Therefore, the NLW will put upward pressure on wages and prices. Notice, however, that the BoE’s Inflation Report expects CPI inflation to hit the target only in 2018q1! With this in mind, gradual and very mild interest rate hikes will occur in the medium-term. It has been suggested that low interest rates have contributed to over-investment in other risky assets (e.g. stocks and housing) therefore adding to bubble pressures which, of course, are setting the scene for yet another financial crisis. If the increase in the minimum wage is able to put an upward pressure on UK inflation sooner than later, the MPC will be forced to respond by hiking earlier and perhaps more aggressively. Such an increase in the interest rate (in response to stronger price pressures stemming from the very increase in the minimum wage) will be more than welcome as it will also counteract UK bubble risks!

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Disagree
Confidence level:
Confident
Comment:
An increase in the minimum wage should bring into the picture the impact on (un)employment through competitiveness issues. So let us consider some international comparisons using the OECD database. For 2015, UK's real hourly minimum wage (2014 constant prices and 2014 USD Purchasing Power Parities) stood at $8.17. This was higher than OECD's median real minimum wage (which stood at $5.45). In fact, since 2000, UK's real minimum wage has been consistently higher than OECD’s median real minimum wage. This, in my view, has not paused a significant threat to our competitiveness and therefore has not led to a significantly lower employment. I remain cautiously optimistic that the new NLW will not undermine our employment prospects.

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