Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?
The issue is less about raising interest rates at all, more about whether the adjustment should be gradual. On this point I would support the gradual adjustment. But there are other signs of reaching full capacity than just past real wage growth. For example, increasing leverage is related to risk and the cost of capital. In my view policy makers should take a broader interpretation of their mandate and include other signs of being somewhere near to full capacity.
I believe that a strong labour market is an indicator of inflationary pressures. However, the relationship is much looser than 'output gap' analysis would suggest. Global integration has had an influence on domestic wages, particularly at the lower end of the spectrum through some extent of factor price equalization. This has weakened the trade-off between wage and inflation. Ignoring international aspects has led to misreading the extent of excess or shortage of demand.
Central banks themselves have argued that QE in part functions through rising asset prices so this hardly seems controversial. However, there is a deeper issue that conventional monetary policy also affects risk prremia. There has been some initial attempts to model spreads in central bank policy reaction functions which is welcome, but it is far from clear that risk taking can be summarised by a single metric. This creates a spil-over between monetary and financial policy which probably requires some further thought.
Debt burdens in most advanced countries and many developing countries are at elevated levels which, cet. par., implies higher risk. To the extent that de-leveraging has occurred, debt burdens are only back to 2006-7 levels. I don't take a great deal of comfort from this. Economies were fragile in this period and the occurance of the crisis was not orthogonal to this fact. It is also worth noting that private debt burdens in the UK are rising slightly again. Note, this is not an argument for further austerity.
For many reasons, not least the legitimacy of our external policy and the integrity of the union. Obvioulsy this needs to be evidence based. I do not think that tax subsidies are necessarily the best way. But productivity levels and trends have become so divergent as long as London suffers some degree of slowdown then there is no obvious area which can offset this. This requires a real rethink of poliyc. For example, identifiable public expenditure is greater in London and the South than the North and how do we include our public support for tertiary education across the UK. Can we have technology only graduate schools in the North? Or chemical science in Teeside rather than London.
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).
Labour Markets and Monetary Policy
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Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?
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Question 1: Do you agree that a strong labour market is a good indicator of building inflationary pressure?
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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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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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A “new” UK industrial strategy ?
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Question 2: Do you agree that the UK needs a new regional policy?
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