Question 1: Which of the following will be the most important constraint on UK potential output in 2023, relative to its pre-2019 trend?
Answer:
Oil prices and Ukraine war
Confidence level:
Very confident
Comment:
In the short run, boosting potential output is hard. But if the war in Ukraine were to end, and oil and natural gas prices fell, this would be a positive supply side shock for the UK economy.
Question 2: Which of the following policies would do the most to boost UK GDP in the medium term (over the next decade)?
Answer:
Public investments and R&D subsidies
Confidence level:
Very confident
Comment:
In theory boosting labour productivity is the single most important way to boost GDP in the medium run. To boost labour productivity we do need to see bold policies and investment (both public and private sector). Investment should cover investment in workers, capital and R&D. Bold policies should be designed to improve labour mobility across the county.
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
Answer:
No
Confidence level:
Extremely confident
Comment:
No because of the impossible trilemma.
The impossible trilemma refers to the idea that an economy cannot pursue independent monetary policy, maintain a fixed exchange rate, and allow the free flow of capital across its borders at the same time.
The ECB should not respond as it supports a floating exchange rate currency regime. If it were to intervene the ECB would have to give up its pursuit of independent monetary policy. Or it would have to intervene in capital markets, thereby stopping the free flow of capital across its borders. None of these options are desirable.
Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
Answer:
Real factors
Confidence level:
Confident
Comment:
The main reason for the fall in the euro was expectations that the US would grow much faster than the euro area, given the war in Ukraine.
Euro area: large negative terms of trade shock from the war in Ukraine. It intensified in September, when Russian gas flows through the Nord Stream 1 pipeline ended. Fears grew that lack of gas would bring European industry to its knees and the block would suffer recession.
USA: as a net exporter of oil and gas, the US experienced a positive terms of trade shock – that not many people talk about. But it is important. It has made the US richer. The US also experienced a strong post-Covid recovery supported by strong household balance sheets built up from pandemic stimulus payments, and a historically tight labour market.
High and rising inflation in both regions led interest rates to rise in both regions through 2022. But the Fed started earlier and hiked aggressively. Monetary policy differentials did also contribute to dollar attractiveness.
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).
Causes for Weak Long-Run UK Growth
Question 1: Which of the following will be the most important constraint on UK potential output in 2023, relative to its pre-2019 trend?
Question 2: Which of the following policies would do the most to boost UK GDP in the medium term (over the next decade)?
Euro weakness in 2022
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
Addressing UK public finances after the mini-budget crisis
Question 2: Relative to the Autumn statement, would the UK be better off reducing public debt
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