Ricardo Reis's picture
Affiliation: 
London School of Economics and Columbia University
Credentials: 
Professor of economics

Voting history

German Council of Economic Experts' view of ECB policy

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Question 1: Do you agree that exceptionally loose monetary policy by the European Central Bank is no longer appropriate?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Given current euro-area estimates of economic slack and inflation in the near term, I would not describe ECB monetary policy as "extraordinarily loose". Moreover, among the many tools employed by the ECB right now, I would argue that some may be discontinued, but others should be maintained and expanded, and new ones should be implemented, so it is hard to agree that all of it is no longer appropriate. More narrowly, if we mean that the current level of the interest rate (the deposite facility rate) should be raised, then I (weakly) disagree; I don't see the obvious benefits of raising rates right now in the euro-area.

German current account surpluses

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Question 2: Do you agree that the German government should increase public spending given its persistently large current account surplus and given that it is part of the Eurozone?

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Answer:
Agree
Confidence level:
Confident
Comment:
The European institutions regularly demand that countries with high fiscal deficits reduce spending because (i) that is in the Maastricht Treaty, and (ii) because thigh deficits come with increasing public debt, higher chances of a sovereign default, and enormous political pressure on the no-bailout clause of the Treaty as we saw a few years ago. The Treaties do not put the European institutions in charge of aggregate demand management. Therefore it makes perfect sense for there to be a pronounced asymmetry between requiring the reduction of fiscal deficits, but having nothing to say about fiscal surpluses. Now, given current conditions in the Eurozone, it seems likely that both Germany and the rest of the EA would benefit from some fiscal expansion in Germany (e.g., http://www.nber.org/chapters/c13784 and http://www.nber.org/chapters/c13786.pdf). Given the increase in the primary surplus since 2004, there also seems to be some room to do so.

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Question 1: Do you agree that German current account surpluses are a threat to the Eurozone economy?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Current account imbalances during 2000-8 played a central role in the Eurozone crisis of 2010-12 (http://cepr.org/active/publications/discussion_papers/dp.php?dpno=9493) and are more generally a frequent signal of financial and macro stresses (http://www.nber.org/papers/w17877). Therefore, a large and continued current account surplus should be cause for some concern, for Germany, the Eurozone, and the rest of the world. At the same time, this does not imply that normalization of the current account should occur very quickly or require bold policies (http://cepr.org/active/publications/discussion_papers/dp.php?dpno=9933) .

Are academic economists ‘in touch’ with voters and politicians?

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Question 7: Voters did not know that there was near-unanimity among economists.

Do you agree that this was an important reason for a majority of UK voters going against the near unanimous advice of the economics profession?

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Answer:
Disagree
Confidence level:
Confident

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Question 6: Economists did not explain the reasons for this consensus in sufficiently clear language.

Do you agree this was an important reason for a majority of UK voters going against the near unanimous advice of the economics profession?

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Answer:
Disagree
Confidence level:
Confident

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