Ethan Ilzetzki's picture
Affiliation: 
London School of Economics

Voting history

The Economic Cost of School Closures

Question 1:What damage will school closures have on economic growth over a 10-15 year horizon?

Answer:
Minor
Confidence level:
Not confident
Comment:
While school closures have certainly been damaging to pupils education, and HMG has done very little to mitigate this damage, it is very difficult to estimate the costs to economic growth.

Will COVID-19 Cause Permanent Damage to the UK Economy?

Question 2: Which aspect of the economy poses the greatest risk for a slow recovery?

Answer:
Firms’ productive capacity (e.g. business failures)
Confidence level:
Not confident at all

Question 1: How quickly will the economy rebound (e.g. to the pre-pandemic trend) once the COVID-19 pandemic has been contained and absent major policy interventions? 

Answer:
The economy will recover within a small number (1-5) of years
Confidence level:
Not confident
Comment:
This depends very much on how long the pandemic will last. If a vacine or very effective treatments were found this year (unlikely), the economy could return to the pre-crisis growth trend very quickly. However, I expect the pandemic, and its economic damage will be with us for at least a year, at which point there will be scarring effects to both the demand and supply side of the economy.

COVID-19 and UK Public Finances

Question 2: What is the best way to (eventually) reduce public deficits and debt?

Answer:
Higher inflation
Confidence level:
Not confident
Comment:
At current rates, the UK should certainly contemplate perpetuities and tax increase are preferable to government spending cuts. I chose inflation more a provocation and a predictive statement than as a recommended policy. (I believe the correct policy is a mix.) I expect inflation will rise in upcoming years from its current neglible levels. If my prediction is wrong, we are truly in a deep deflationary trap and the high levels of public debt are an opportunity to re-think the low inflation targets that have been the fasion of the past several decades.

Question 1: How urgently should the UK government address the rise in public debt?

Answer:
There is no need to take or announce any budgetary actions to reduce the deficit or the public debt until the end of the pandemic
Confidence level:
Extremely confident
Comment:
The government can borrow in perpetuity at half a percent. The market is paying the UK government to lend to it. This could very well change but I think it would be unwise to be concerned about hypothetical public debt crises in face of the worst recession in living memory.

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