Ricardo Reis's picture
Affiliation: 
London School of Economics and Columbia University
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:
Neither agree nor disagree
Confidence level:
Confident
Comment:
There has been some great research on this topic in the last few years, and there are still many studies underway. My reading of it is that it that it is too early to tell. But I hope that in 2-3 years, I could give a confident answer to this question.

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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:
Not confident
Comment:
Increases in credit seem to be predictive of financial crises, and likewise for the level of public debt and sovereign debt crises. But the associations are weak, not very stable, unclear if causal, and there are lots of false positives. As for asset prices, "inflated asset prices" is too vague, as there is some "inflated" asset price" in some market almost every day. But, if some negative shock hits the world economy, having higher debt in many cases heightens its negative impact, although stating it this way is not that useful. So, I slightly agree, but with little confidence.

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:
Very confident
Comment:
The space is too short to list all the benefits and cost, let alone to quantify them them against each other. I agree especially with this being the right time, with the crisis behind, and European reform ahead, to have a serious reflexion and analysis of the benefits and costs of the euro today. We have data now, and understand better than 30 years ago what the more relevant issues. Expanding the euro by itself without thinking hard about the current flaws in the monetary union (noticeably, the lack of a safe European asset) might well make things worse in the future, even if overall the euro has had more benefits than costs on the past.

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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:
Very confident
Comment:
The economic argument for forcing an agent to join a group or a set of contracts typically has to do with extreme adverse selection and ex ante gains from pooling to all. I do not see these here.

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:
Agree
Confidence level:
Confident
Comment:
I don't think it is a coincidence that unemployment is so much lower (and fell faster) in the UK than in most of continental Europe, and at the same time real wage growth has been so moderate. Moreover, there are very clear differences between UK and Eurozone labor policies.

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