Evi Pappa's picture
Affiliation: 
European University institute
Credentials: 
Professor of Economics

Voting history

Should the ECB Reformulate its Inflation Objective?

Question 3: Which of the following best reflects your opinion on the following statement? “The ECB should explicitly recognize unemployment and/or economic growth as a secondary aim, secondary to its price stability mandate.”

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
European countries are very heterogeneous, labor market institutions, the role of the government and the sensitivity of the private sector to changes in the interest rate are not comparable across countries. Monetary policy is supposed to be neutral in the long run, so I cannot see how growth can be a secondary objective. Of course, in the current conditions the shock is common and any policy to lift the euro area economy away from recession should be welcome, but it should not become a rule, rather than an exception given the current circumstances. Regional fiscal policy is a better tool to accomplish unemployment and growth objectives.

Question 2: Would you support increasing the ECB’s inflation target to a higher rate of inflation than the current 2% target?

Answer:
Strongly oppose
Confidence level:
Extremely confident
Comment:
Any substantial change in the monetary policy strategy from the part of the ECB has the danger of increasing policy uncertainty which coupled with the macroeconomic uncertainty might lead to disastrous outcomes and the loss of anchoring. Many DSGE models (See, for example, Ascari and Sbordone, JEL 2014) suggest that lifting the inflation target might result into indeterminate equilibria, which in plain words means further instability, especially of inflation. Moreover, a higher inflation target, according to same models, will lead to higher markups which will imply more distortions in the steady state and a lower level of output in the long run.

Question 1: Which of the following best reflects your opinion on the following statement? “The ECB should explicitly state that it will allow inflation to temporarily exceed the 2% target following extended periods of low inflation.”

Answer:
Agree
Confidence level:
Extremely confident
Comment:
Some kind of flexible Inflation targeting with elements of discretion in exceptional times to me seems the most prudent and clear objective for the ECB.

The Eurozone COVID-19 Crisis: EU Policy Options

Question 2: What is the best mechanism to pay for economic support provided by and to EU member states to combat the COVID-19 crisis?

Answer:
Debt restructuring or write-off
Confidence level:
Confident
Comment:
The institutional weaknesses of the eurozone have been laid bare already twice in the last twenty years. Once with the Sovereign debt crisis and now with the response to the COVID-19 crisis. The proposals on the table do not differ substantially from the ones put forward some years ago during the sovereign crisis. Thus, we need to judge them not only in terms of their substance but also on their feasibility and the willingness of policymakers to adopt them. I believe that Eurobonds and the Recovery Fund are not politically feasible, but whats more is that they will not solve the problem of the periphery countries as they would be enforced under several restrictions on fiscal policy in the periphery and the countries more severely hit by the COVID-19 at this moment need fiscal space. The ECB has the authority, and the capacity to provide financing through its Pandemic Emergency Purchase Programme (PEPP), buying debts of crisis countries disproportionately. For that reason, I view debt restructuring coordinated by the ECB as the most efficient, timely and realistic solution.

Question 1: What is the total size of funding that you would advocate at the EU level in support of its members to weather the COVID-19 crisis this year?

 

 

Answer:
No opinion
Confidence level:
Very confident
Comment:
Given the existing economic and health data is hard to evaluate the costs of the Pandemic crisis. For that reason I cannot evaluate what should be the correct size of funding. Yet, the EMU's original scope was to be a Union of transfers, as a result, the EU should do everything it takes to weather the COVID-19 crisis in those countries that were to some extent, randomly, and more severely affected by the pandemic.

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