Question 1: How large is the impact of monetary policy on the joint distribution of income and wealth?
Answer:
Small
Confidence level:
Confident
Comment:
The evidence suggests that monetary policy does affect the distribution of income and wealth. QE is thought to have a larger impact on inequality than changes in interest rates.
Question 2: What role should inequality play in the monetary policy decisions (interest rate policy and quantitative easing)?
Answer:
Minimal role
Confidence level:
Confident
Comment:
Monetary policy has a clear mandate which is to deliver price stability. If that objective can be achieved alongside lowering inequality (at no extra cost) then it should be done. However, the only way to find out if that is possible, is for central banks to study the impact of monetary policy decisions on inequality.
There is compelling evidence that QE raises inequality - by benefiting the rich (who hold financial assets) relative to the poor. Given QE is a relatively new policy tool, evaluating its potential 'unintended consequences' should be mandatory. These evaluations will be critical to a broader public understanding of the pros and cons of QE, and how well it is aligned to the governments broader policy agenda.
Question 1: How beneficial would it be to the UK economy for the Bank of England to introduce a central bank digital currency in some form in the upcoming decade?
Answer:
Beneficial
Confidence level:
Extremely confident
Comment:
CBDC is likely to be beneficial to the UK economy as a whole. It will be a plus when it comes to improving the speed of transmission of monetary policy. At present monetary policy is implemented through repo transactions between the central bank and major high street banks. When interest rates are cut, banks can decide how much of that to pass through to borrowers and lenders. Sometimes the cut is fully passed through to borrowers and savers immediately, sometimes it is only partial. Sometimes the pass-through is asymmetric between borrowers and savers. The high street bank creates frictions in the transmission of monetary policy. CBDC removes those frictions. CBDC has the potential to make the implementation of negative interest rates easier. CBDC has the potential to raise the productivity of the UK economy.
Question 2: What effect will the introduction of a CBDC have on UK banks?
Answer:
Great harm
Confidence level:
Not confident at all
Comment:
Central bank digital currencies will be the next big disrupter to the financial system. The devil is in the detail. The level of disruption will depend on how the CBDC will work in practice.
At one extreme, if I can hold a central bank digital currency account, and undertake all my transactions through that account, I do not need a high street bank account. This CBDC innovation has the potential to be the final nail in the coffin with respect to banks' traditional role as an intermediary between borrowers and savers.
Some of that disruption is already underway with the growth of challenger banks (such as the Monzo app) and the availability of loans from non-bank financial institutions.
Proposition 2: Asset prices and financial imbalances are best addressed using macroprudential tools and left out of the monetary policy decision making process.
Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Propostiion 2 is the post-GFC consensus.
The jury is still out on how successful the post-GFC framework has been. The understanding of macro prudential policy is still very low amoung the general public.
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).
Monetary Policy and Inequality
Question 1: How large is the impact of monetary policy on the joint distribution of income and wealth?
Question 2: What role should inequality play in the monetary policy decisions (interest rate policy and quantitative easing)?
Central Bank Digital Currency for the UK
Question 1: How beneficial would it be to the UK economy for the Bank of England to introduce a central bank digital currency in some form in the upcoming decade?
Question 2: What effect will the introduction of a CBDC have on UK banks?
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.
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