Volker Wieland's picture
Affiliation: 
Goethe University Frankfurt and IMFS
Credentials: 
Professor of Monetary Economics
Member of German Council of Economic Experts
Managing Director, Institute for Monetary and Financial Stability

Voting history

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:
Disagree
Confidence level:
Confident
Comment:
To my knowledge there is no comprehensive scientific assessment that looks at all the economic benefits and costs of the common currency on a country per country basis. There are studies of partial aspects. Thus, I do not agree to a statement that claims certainty that the euro has had more benefits than costs (I add "in economic terms"). To give an example, giving up an independent monetary policy implies that a country cannot use monetary policy anymore as a stabilization tool directed towards national objectives. Monetary union policy is necessarily directed towards union-wide variables. Thus, inflation and output variability on a national level will be greater than in the case of national currencies and effective (credible) nationally-oriented monetary policies. There's evidence for that. See, for example, Wieland JIMF 1996, "Monetary policy targets and the stabilization objective ..." for an early study of EMS crisis and potential benefits and costs of a common currency and monetary policy. Of course, the relative improvement or loss relative to what existed pre-EMU likely differs across countries. On the other side, common monetary policy may help in improving credibility and independence of the monetary authority, and there by to maintain a low average inflation. That was an argument for some to join EMU. Recall "The advantage of tying one's hands .." Giavazzi-Pagano, EER 1988.

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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:
Neither agree nor disagree
Confidence level:
Extremely confident
Comment:
My understanding is that it is a fact already that all EU member states except Denmark and Great Britain are required to adopt the euro once they fulfil the conditions. This is also what Juncker repeated in his speech. I am somewhat surprised that he received so much attention with this statement. I agree that it is a fact at this point. I would not recommend starting an initiative to change the current rules. I would disagree with now requiring those EU members that received an opt-out to adopt the euro. I think great care should be given to the economic conditions. Clearly, there've been mistakes in the past, and countries admitted based on faulty data or insufficiently sustainable conditions. So , I agree with Juncker's statement to the extent it reflects the facts and disagree with wider interpretations suggesting that countries should adopt the euro without clearly fulfilling the conditions. Finally, whether it was a good idea in the first place is another question.

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:
Very confident

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Question 1: Do you agree that lower real wage growth was beneficial for employment levels during the Great Recession?

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Answer:
Agree
Confidence level:
Very confident

The Future of Central Bank Independence

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Question 2: Do you agree that the traditional argument that less central bank independence leads to higher inflation will (still) be relevant over the next 48 months in Western economies?

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Answer:
Strongly agree
Confidence level:
Very confident
Comment:
Yes, the ECB and other central banks will find many supporters among hard-pressed governments for argueing that low rates are still needed and overshooting inflation objectives ought to be tolerated after staying below for so long. Throw in a tumbling banking system and high share of non-performing loans, and you find even more reasons for keeping rates low and postponing any financial reckoning.

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