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

Voting history

A “new” UK industrial strategy ?

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Question 2: Do you agree that the UK needs a new regional policy?

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Answer:
Agree
Confidence level:
Very confident

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Question 1: Do you agree that the UK needs a new industrial policy?

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Answer:
Agree
Confidence level:
Very confident
Comment:
The UK has for many years struggled with weak productivity. There are also significant regional challenges with some regions poorer and with higher unemployment / lower employment. A new industrial policy that encouraged the establishment of sustainable local economies which are themselves interconnected to the rest of the UK could at least help the latter issue. If such policies encouraged more dynamically-growing industries, then they could even help the former productivity issue.

The Future of Central Bank Independence

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Question 3: More generally, do you agree that it is desirable to maintain central bank independence? Again focus on the near future, say next 48 months.

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Answer:
Strongly agree
Confidence level:
Very confident
Comment:
As outlined above, I believe that monetary policy and other central bank policies should be kept free of manipulation for political gain. I also believe that monetary policy independence should be maintained to avoid concerns that that government is trying to regain control of monetary policy for such manipulation.

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Question 2: Do you agree that the traditional argument that less central bank independence leads to higher inflation will (still) be relevant over the next 48 months in Western economies?

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Answer:
Disagree
Confidence level:
Confident
Comment:
I don't expect that central bank independence, or a reduction in it, will a main driver of inflation developments in the coming 48 months. Nor do I agree that some increased government involvement in central bank affairs would make impossible the implementation of a path of policy that avoids the classic inflation biases that independence helped address. The key lessons of the central bank independence literature are that monetary policy, and I believe by extension other central bank policies, should be kept free from manipulation for political gain. The expanded remit of central banks warrants greater accountability and perhaps, in some cases, it would necessitate more direct government involvement. But this does not mean that inflation flighting ability of the central bank will necessarily suffer. It is already the case that central banks do not have independence in all policy realms. For example, I believe the BoJ can be made to intervene to affect the exchange rate at the request of the government despite its monetary and legal independence.

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Question 1: Do you agree that central bank independence in the Eurozone and the UK will decline over the next 48 months?

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Answer:
Neither agree nor disagree
Confidence level:
Not confident
Comment:
I agree that there will be continued pressure on central bank independence in both the UK and eurozone. However, I don't know how successful these political campaigns against central banks will be. The ECB already has strongly ingrained goal and instrument independence which is going to limit the scope to reduce independence. Moreover, while Balls, Howat and Stansbury (2016) argue that we now need some greater coordination with fiscal authorities when monetary policy is at, or near, its lower bound, this is difficult in the eurozone in the absence of a central fiscal authority.

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