Costas Milas's picture
Affiliation: 
University of Liverpool
Credentials: 
Professor of Economics

Voting history

Secular Stagnation

Question 1: Do you agree- making your own definition of secular stagnation clear if you disagree with that offered here- that it is more likely than not that the advanced Western economies have entered into a period of secular stagnation?

Answer:
Disagree
Confidence level:
Confident
Comment:
I do not see convincing evidence of permanently low growth (secular stagnation); the UK economy, which has bounced back strongly, is a good example. If secular stagnation was an issue then one would arguably expect the admittedly low GDP growth recorded over the past few years to weigh heavily on subsequent growth. To test this, I run a small “experiment”. Using UK data over the last 150 years and controlling for the effects of (a) global financial crises (using the financial crisis indicator from the “correct” spreadsheet of Profs Reinhart and Rogoff), (b) a long UK real interest rate and (c) the UK debt/GDP, I found (via impulse response analysis) that whether the UK economy grows above or below an endogenously estimated “trend rate” of 2.2%, past GDP growth weighs in a similar manner (in terms of impact and duration) on subsequent GDP growth. Loosely speaking, growth persistence is very similar whether we are in a low or high growth regime which (I feel) rejects secular stagnation.

Migration and the UK economy August 2014

Question 2: Do you agree that current government policies with respect to non-EU migration (including policies on students, skilled workers, and family migration) are effective in maximizing the gains to the economy from migration while minimizing any possible negative impact to specific groups?

Answer:
Neither agree nor disagree
Confidence level:
Not confident

Question 1: Do you agree that migration to the UK can be expected to be beneficial for the average income of current UK inhabitants in the upcoming decade?

Answer:
Neither agree nor disagree
Confidence level:
Not confident

UK House Prices and Macro-Prudential Policy July 2014

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Question 2: When housing-related risk is deemed excessive from the viewpoint of financial stability, do you agree that the correct response is to deploy macro-prudential tools, leaving interest rates focused on the needs of inflation and aggregate real activity?

 
Answer:
Disagree
Confidence level:
Confident
Comment:
Would macro-prudential policy work? From a statistical point of view, growth of house prices “Granger causes” (i.e. precedes) growth of mortgage debt; the opposite is not true. Indeed, this was also acknowledged by Ben Broadbent, External MPC Member (back in a March 2012 speech). This suggests to me that any macro-prudential measures to restrict the growth of mortgage debt and put a lid on house prices would be ineffective. So, to the extent we are worried about house prices, we should be looking at raising interest rates. With this in mind, would it not be much more effective to merge the Monetary Policy Committee (MPC) and the Financial Policy Committe (FPC) since their duties largely overlap?

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Question 1: Do you agree it is time for more robust policy action to prevent a build-up of excessive housing-related risk?

 

 
Answer:
Agree
Confidence level:
Confident
Comment:
Nationwide reports house prices since 1952. In 2014Q1, annual house price inflation stood at 9.2% (compared with the 8.1% average of the last 62 years). So, a bit of difference (albeit small) there. Although London house prices are "taking off" at an annual average of 18% (twice as much as the historical average; Nationwide provides regional data from 1973 onwards) house prices in North, North West and Yorks&Hside are also growing strongly (but still remain 1-2 percentage points below their historical growth rates). What happens in real terms? In 2014Q1, UK real house price growth (adjusted for RPI inflation) grew at an annual average of 6.6%, well beyond the long-run average of 2.6%. This is the highest growth (in real terms) since the last quarter of 2004 (when annual real house price growth “hit” 10.4%). So, YES, we should be worried about house prices.

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