David Miles's picture
Affiliation: 
Imperial College
Credentials: 
Professor of economics

Voting history

Fiscal Rules in the European Monetary Union

Question 2: Which of the following is the one reform you would choose to improve fiscal rules?

Answer:
Re-nationalization of fiscal discipline
Confidence level:
Confident
Comment:
Partial centralisation (either real or anticipated) of responsibility for making good on debt repayment of euro area government bonds is a bad place remain.

Proposition 1: The existing fiscal rules for European Monetary Union members require revision.

Answer:
Agree
Confidence level:
Confident
Comment:
The justification for restrictions on national fiscal policies has always seemed flimsy and that may be one reason why whenever they have seemed to bind there is reluctance to really make them apply in a meaningful way. It is the existence of a (misplaced) belief that bailing out a euro area government facing default on its debt is somehow warranted that underlies much of the case for restrictions on national policy. Better to remove perceptions that there is a Euro backstop protecting euro denominated government bonds than create a set of fiscal rules that are not effective.

Asset Prices and Monetary Policy

Proposition 2: Asset prices and financial imbalances are best addressed using macroprudential tools and left out of the monetary policy decision making process.

 

Answer:
Agree
Confidence level:
Confident
Comment:
Central banks do have a big role in maintaining financial stability and asset price gyrations can create problems. But interest rate policy is just too blunt an instrument to be the right tool. As regards house prices, one spectacularly mis-guided direction to go would be to give the central bank a target for house prices as a means to increase affordability. The tools relevant to that are not at all those a central bank has - tax and planning policy are the right instruments. .

Proposition 1: The Bank of England’s mandate should be officially modified to take housing or other asset prices into account in its monetary policy decisions.

Answer:
Disagree
Confidence level:
Confident
Comment:
Trying to figure out what the fundamental value of an asset should be (i.e. the price absent bubbles or irrational optimism or pessimism) is very hard. Even if one could do so, using monetary policy (the central bank's policy rate) to eradicate the divergence from the fundamental value is deeply problematic when often the policy rate needed to keep consumer price inflation stable would be very different. A better strategy is to use macro-prudential instruments to reduce the risks that asset price mis-alignment bring economic instability.

The “Spend Now, Tax Later” Budget

Question 3: Which of the following best characterizes the pace at which the budget addresses UK’s medium term fiscal challenges (deficit and debt)?

Answer:
Other, or no opinion
Confidence level:
Confident
Comment:
The decline in the deficit is not projected to happen quickly. That is almost certainly sensible but poses risks. No one can feel confident of the ability of the UK government to issue debt at such favorable rates several years down the road. Having to continue to issue a great deal of new debt for years to come is therefore inevitably a risk.

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