Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
Answer:
Financial factors
Confidence level:
Not confident at all
Comment:
All three factors likely played a role. US is a net energy exporter so it actually experienced a positive terms of trade shock; quite the opposite for Europe. However, I think the perception has been more dire than reality -- European economies dealt with energy disruptions better than expected, and the catastrophic scenarios did not come about. Perhaps that is why the euro has straightened in recent months. Research by Mukhin and Itskhoki suggests financial factors are important, and my sense this episode is no exception. Monetary policy landscape is more subtle in the eurozone, and mon pol differences likely played a role too. Ultimately we're talking about exchange rates, so confidence in any decomposition remains low.
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
Answer:
No
Confidence level:
Confident
Comment:
Focusing on maintaining monetary stability by using the monetary policy toolkit and enhancing financial stability with appropriate macroprudential and microprudential regulation should be sufficient. I worry about the long-term consequences of directly intervening in the exchange rate.
The CFM surveys informs the public about the views held by prominent economists based in Europe on important macroeconomic and public policy questions. Some surveys focus specifically on the UK economy (as the CFM is a UK research centre), but surveys can in principle focus on any macroeconomic question for any region. The surveys shed light on the extent to which there is agreement or disagreement among these experts. An important motivation for the survey is to give a more comprehensive overview of the beliefs held by economists and in particular to include the views of those economists whose opinions are not frequently heard in public debates.
Questions mainly focus on macroeconomic and public policy topics. Although there are some questions that focus specifically on the UK economy, the setup of the survey is much broader and considers questions related to other countries/regions and also considers questions not tied to a specific economy.
The surveys are done in collaboration with the Centre for Economic Policy Research (CEPR).
Prospects for Euro Area Inflation in 2023
Question 1: How likely is it that peak headline euro area inflation is behind us?
Question 3: Under its current policy trajectory, with rates peaking at 3.5%, which of the following is most likely?
Euro weakness in 2022
Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
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