Michael Wickens's picture
Affiliation: 
Cardiff Business School & University of York
Credentials: 
Professor of economics

Voting history

Labour Markets and Monetary Policy

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Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Although unemployment is little related to inflation, wage growth does contribute to inflation. But as wage growth is not the only, or recently even the main factor, affecting inflation, the monetary policy decision should not focus just on wage growth. As higher inflation will result in higher wage growth there may even be reverse causation. This suggests a more aggressive anti-inflation policy now rather than wait for wage growth as this will dampen any transmission from wage growth.

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Question 1: Do you agree that a strong labour market is a good indicator of building inflationary pressure?

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Answer:
Disagree
Confidence level:
Very confident
Comment:
For many years the various versions of the Phillips curve have failed to capture a significant relation between inflation and unemployment, or even between wage inflation and labour market pressure. It is, and has been for many years, one of the weakest links in the New Keynesian models of the UK and US. It is interesting that the wage-price sector of the Smets-Wouters model is rejected even though this is one of the main things that they thought would result in an improvement over the price flexibility of New Classical models. A possible reason in the UK is that the relation is based primarily on demand effects whereas in recent years the labour market has been dominated by labour supply effects, namely, a large increase in the supply of (mainly unskilled) labour.

Bitcoin and the City

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Question 2: Do you agree that the regulatory oversight of cryptocurrencies needs to be increased?

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Answer:
Agree
Confidence level:
Confident
Comment:
Although regulation may not be required yet, any asset whose price and use is rising at the current rate of Bitcoin ought to monitored carefully by the financial authorities. The focus should be on the risks of financial institutions that hold bitcoins and the unregulated supply of bitcoins.

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Question 1: Do you agree that cryptocurrencies are currently a threat to the stability of the financial system, or can be expected to become a threat in the next couple of years?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
Bitcoin use is still too small to be a risk to the financial system at present. Although it is unlikely to present a systemic risk in the next two years, if its price contunues to rise at the present rate it could become a major risk to holders. The main concern is that its attraction is now largely as a speculative asset rather than as a vehicle currency or an inflation hedge.

House Prices and the UK economy

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Question 2: Do you agree that a more widespread weakening of the UK housing market will slow UK GDP growth significantly?

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Answer:
Agree
Confidence level:
Confident
Comment:
Would but not necessarily will. The attempt to increase the supply of housing would "weaken" the housing market but would generate output and not slow output growth. One problem with interpreting correlations between the two is reverse causation: slower growth would weaken housing demand. A big unknown factor in housing is monetary policy. If the Bank continues to raise interest rates (as it should) then this will weaken the housing market. This is all to be set against the background of an excess demand for housing in much, but not all, of the country which will make the housing market strong for some time to come.

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