Sir Charles Bean's picture
Affiliation: 
London School of Economics
Credentials: 
MA Cambridge
PhD MIT

Voting history

German Council of Economic Experts' view of ECB policy

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Question 2: Do you agree that the ECB's monetary policy masks structural problems of member states?

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Answer:
Disagree
Confidence level:
Confident
Comment:
I don't believe that it "masks" the structural problems - they are still perfectly evident - though it certainly reduces the pressure on national governments to address them. However, the ECB would be straying beyond its legal mandate were it to deliberately underachieve on its inflation objective in order to place more pressure on member states to undertake the necessary reforms. Such behaviour by the ECB would lack democratic legitimacy.

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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:
While the euro area's primary economic problems can only be addressed with structural reforms, there is still spare capacity, as evidenced by the elevated level of unemployment and persistently weak underlying inflation. Given that, the ECB's policy stance seems to me to be entirely warranted (though I would prefer to see more of the burden in sustaining aggregate demand being shouldered by fiscal policy, especially in Germany).

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:
I believe that there are very good grounds for a German fiscal expansion at the current juncture. The euro-area fiscal rules are asymmetric in forcing high-deficit countries to consolidate, but there is no countervailing pressure on the low-deficit/surplus countries in the other direction. As a result there is a deflationary bias in the area as a whole. In normal circumstances, the ECB would be able to offset that deflationary bias, but it is much harder at the present juncture where policy rates are at, or near, their lower bound. The one rub I would add is that the stimulus need not come entirely through extra public spending (though the state of German infrastructure would warrant that). It can also come through fiscal incentives and structural changes that encourage higher private consumption and investment.

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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:
Strongly agree
Confidence level:
Extremely confident
Comment:
While there are demographic reasons for Germany to be running a small surplus at the current juncture, the size of the present surplus is entirely disproportionate. This is not only complicating adjustment within the euro area, it is also contributing to the downward on the global real interest rate. That in turn adds to the pressure on central banks to keep policy rates at unusually low levels with all the adverse side effects that causes. The German surplus is not only a threat to the euro area economy but also to the global economy.

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:
Strongly disagree
Confidence level:
Very confident

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