Michael McMahon's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of Economics

Voting history

Global risks from rising debt and asset prices

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Question 1: Does the world economy face heightened risks arising from an excess of public and private debt and/or inflated asset prices?

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Answer:
Agree
Confidence level:
Confident
Comment:
I agree there is "heightened risks" but stop short of thinking we are on the verge of another crisis. Debt service costs are low and a natural reaction is to build up more debt. The banks providing the credit, at least in the UK, are better capitalised and I don't think the normalisation of interest rates will take nominal rates to anything like what was the pre-crisis normal (at least in the near term).

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Question 2: Is the loose monetary policy of major central banks responsible for the recent increase in global leverage or asset values?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Low debt service costs play a role and hence there is a role for loose monetary policy - as Borio says "unprecedented gradual pace of monetary policy normalisation has played a role". But I don't agree monetary policy is solely responsible nor do I think I would have advocated a faster normalisation over the past years given the objective of most central banks is to maintain price stability in terms of CPI and the pressures on that front have warranted loose monetary policy.

Juncker's State of the Union Address

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Question 2: Do you agree that the euro has had more benefits than costs?

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Answer:
Agree
Confidence level:
Not confident
Comment:
For some countries it clearly does. For others, it is less clear. On balance, I lean toward greater benefits.

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Question 1; Do you agree that euro membership should be compulsory for all EU member states?

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Answer:
Disagree
Confidence level:
Confident
Comment:
So long as the EU accept that not every country should appropriately be allowed in, as is implicit in the entry criteria, the countries should remain some control over the decision to enter.

Wages and economic recoveries

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Question 2: Do you agree that the different behaviour of UK real wages relative to Eurozone wages during the Great Recession is in large part due to the UK having different labour market policies?

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Answer:
Disagree
Confidence level:
Confident
Comment:
I'm sure the flexibility of the labour market has contributed. As have differences in inflation - you can easily imagine firms reluctant to increase prices even further in tough demand conditions facing pressures to cut costs across the board and wage restraint was part of this. Weak productivity growth has further limited the scope for pay increases (another difference with the countries mentioned like Germany). Finally, the trend in real wages before the crisis was not necessarily sustainable. As such, some changes in trend were necessary.

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