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
Comment:
All of the effect indicated above pose a risk in terms of the speed of the economic recovery, but possibly at different horizons. Presumably the effects of growth from a reduction of productive capacity, for example, would be felt especially at shorter horizons, while the effect on human capital would have a more persistent dampening effect.
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 rapidly return to its pre-crisis growth trend, but there will be a permanent effect on the level of GDP
Confidence level:
Not confident
Comment:
I believe the most likely scenario is that there is a return to pre-trend growth, once a vaccine has been found and assuming that stimulative policies continue to support the economy. I do think however that there is a lot of uncertainty around this forecast. In particular, there are also quite big risks that the pandemic has permanent (or at least very persistent) effects on long-term growth, due to 1) scarring of beliefs, which could change the behaviour of the actors in the economy very persistently and 2) changing working styles (and the subsequently reduced need to be in cities), which could affect negatively big cities like London in particular.
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:
Joint borrowing by member states (e.g. Coronabonds)
Confidence level:
Confident
Comment:
Covid perpetual eurobonds, such as those proposed by Giavazzi and Tabellini (https://voxeu.org/article/covid-perpetual-eurobonds), are, in my opinion, the most effective tool to finance the fiscal measures that should be put in place.
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:
5-10% of GDP
Confidence level:
Confident
Comment:
The large exogenous shock to the economy caused, throughout Europe and the world, by the pandemic, warrants a large fiscal response with central bank backing. The EU should have joint fiscal instruments as well as joint financial instruments. There are several channels through which this crisis could be amplified, e.g. risks around bank solvency, so interventions to shore up the economy could ultimately be beneficial for all the countries in the EU, not just for the worst hit countries.
Question 3: Which would be the maximal public debt you would be willing to tolerate if used effectively (as in your answers to 1 and 2 above) to support an economic recovery?
Answer:
120% of GDP (e.g. if fiscal support were doubled)
Confidence level:
Not confident
Comment:
There are various examples of G20 countries running these levels of debt. With reasonable growth rates in the future, and assuming that the government could continue to borrow at low rates, a 120% debt-to-GDP ratio could still be sustainable.
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).
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?
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?
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?
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?
Covid-19: Economic Policy Response
Question 3: Which would be the maximal public debt you would be willing to tolerate if used effectively (as in your answers to 1 and 2 above) to support an economic recovery?
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