Morten Ravn's picture
Affiliation: 
University College London
Credentials: 
Professor of economics
Head of Department

Voting history

Euro Area Deflation and Risk for UK Economy May 2014

Question 2

Do you agree that a deflation in the Euro area (as defined in Question 1) would pose a considerable risk to the UK recovery?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
As stated above, deflation as such may not be the real problem (but will make the problem worse due to nominal debt contracts). Should europe's problems worsen, it is likely to impact on the UK because of the close trade and financial links.

Prospects for Economic Growth in the UK April 2014

Question 2

Do you agree that, in the wake of the financial crisis, any downward adjustment to the expected average annual long-term growth rate of the UK economy is likely to be by less than 0.25 percentage points?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
I think there are two issues. The first is related to the financial crisis. The financial crisis and its impact on banking may be impacting negatively on the growth rate both because of misallocation of bank lending across different types of projects / entrepreneurs (towards less risky but also lower return projects) and because of reluctance of banks to lend. But there is a second layer of uncertainty which I pointed towards above which is the extent to which the boom in the 1990's - early 2000's were driven by IT/internet and whether those days are gone now - and, whether there are new drivers of growth coming (such as biotech, nanotech etc.). Thus, I find it hard to make an informed guess on the growth rate in the years to come. there is certainly a need for research into this.

Question 1

The long period of slow or negative growth might imply that there is a substantial output gap in the UK economy.  Do you agree that there is currently a larger output gap than the OBR estimate to the extent that the shortfall in output relative to capacity is 3% or greater?  

Answer:
Agree
Confidence level:
Confident
Comment:
I think we are seeing a deep and long recession due to unusual strong propagation of the shocks to the economy that derived from the financial crisis. I believe that these propagation mechanisms derive from financial and labour markets in combination with the fiscal adjustments. I find it hard to identify key reasons for why there should have permanent decline in the level of output. There might be some uncertainty towards the long run growth rates to the extent that the growth in the 1990's and early 2000's were related to IT/Internet boom (and housing).

Responsible long-term fiscal policy (pilot survey)

First question:

To help ensure that advanced country governments have sufficient flexibility to respond to future crises, it is important that finance ministries aim for a ratio of public debt to GDP that is substantially less than 60% in normal times.

Answer:
Agree
Confidence level:
Confident
Comment:
Some target for debt / GDP may be useful because it helps building credibility and avoid debt getting "unsustainable". But optimal debt levels will almost certainly vary across countries (due to structural differences) and across time so I am not sure that 60 percent is the right value.

Second question:

To help ensure that advanced country governments pursue responsible fiscal policies, countries should adopt formal rules for limiting structural deficits, which are supported by primary legislation or constitutional reform.

Answer:
Agree
Confidence level:
Very confident
Comment:
Rules are a useful for building a sustainable long term position. A country like Sweden that has a surplus target did relatively well during the recent crisis. Rules have little credibility unless they are formal so some kind of legislation may be useful. It may also be useful then to state circumstances under which the rules can be overcome or temporarily adjusted.

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