Pietro Reichlin's picture
Affiliation: 
Università LUISS G. Carli
Credentials: 
Professor of Economics

Voting history

Global risks from rising debt and asset prices

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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:
Agree
Confidence level:
Confident
Comment:
Loose monetary policy is a factor contributing to higher asset values. On the other hand, in the EMU, this type of policy may be the only way to compensate for the lack of a super-national fiscal policy and the inability to issue Euro bonds, i.e., safe assets.

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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 see mainly a public debt problem. The countries with higher public debt are those that had the worst performance and highest volatility of the main macro variables after the great recession. Low interest rates in these countries and loose monetary policy reduce governments incentives to make fiscal consolidations and banks incentives to dispose of non performing loans. It is entirely plausible that problems may arise in the near future.

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:
Confident
Comment:
Answering this question requires making a guess about what would have happened in the EU in the absence of a monetary union, which is very difficult. In any case, I think that many of the problems that plagued part of the EU after the big recession would have emerged anyway. The real problem with the euro is in the poor performance of a selected number of countries and in the somewhat unexpected degree of financial systemic risks that materialized after 2010. These countries are those belonging to Peripheral Europe (the so called PIIGS). However, I think that Spain, Portugal and Ireland are now overcoming the problems created by the excessive volatility of capital flows and the EMU institutions are learning how to cope with systemic risks. The creation of the ESM was an important step and the ECB policies have been effective. Overall we can say that Italy's poor performance is the most important case that may lend ammunition to those who claim that giving up exchange rate depreciations is detrimental for growth. However, I think that Italy's problems are not much related to the EMU as their origin dates back to the end of the eighties/beginning of the nineties. The initial phase of the EMU (characterized by interest rates convergence) may have slowed down reform efforts in Southern Europe, but the situation has changed since then.

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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:
I think that joining the EMU should be contingent to a large enough degree on convergence in terms of macro variables, such as inflation, nominal rates, governments budgets and debt levels. Local public opinion and political actors should also be sufficiently ready to accept some devolution of powers.

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:
Strongly agree
Confidence level:
Confident
Comment:
Yes. I would point out the smaller role of national negotiations and unions and the higher degree of competition in markets.

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