Martin Ellison's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

Lockdowns and UK Economic Performance

Question 3: Using not only the policy tools that have been part of the UK policy mix thus far but also policy tools implemented in other countries, to what extent does the government face a tradeoff between saving lives and preserving livelihoods? 

Answer:
Small tradeoff
Confidence level:
Confident

Question 2: How much will the new lockdown measures introduced on Thursday November 5 hurt UK economic activity this year relative to a counterfactual with the milder measures adopted over the summer?

Answer:
Small damage
Confidence level:
Confident

Question 1: How much of the decline in GDP experienced to date would have been avoided in the absence of any lockdown measures or other policy interventions (such as fiscal support)?

Answer:
A moderate portion of the decline (around a half)
Confidence level:
Not confident

Should the ECB Reformulate its Inflation Objective?

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

Answer:
Strongly support
Confidence level:
Confident
Comment:
It’s unclear whether raising the inflation target is a silver bullet. Compared with the “allow inflation to exceed 2% for a period after low inflation” proposal in the previous question, it does though have the benefit of being a bold move. In my own research on the Ends of 30 Big Depressions (with Kevin O’Rourke and Sang Seok Lee, https://www.nber.org/papers/w27586), we argue that abandoning the gold standard was instrumental in ending the Great Depression in many countries. The turnaround in inflation expectations (and subsequent economic recovery) only started when many countries left the gold standard. Something equally dramatic may be needed to get inflation expectations up. Changing the inflation target could be a big enough policy change to make it work.

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:
Not confident
Comment:
The idea of letting inflation drift above 2% for a while after periods of low inflation is a poor man’s price level target. I’ve no objection to the ECB doing this, but I am doubtful that it will deliver very much. Average inflation has been well below 2% over the last decade, despite the best attempts of the ECB to follow unconventional policies. From that base it’s difficult to believe that a promise to support higher inflation after a period of low inflation will have much bite. There are so many things that can go wrong. What if the promise is not believed? What if people (possibly rationally) think that monetary policy is now so weak that the ECB can never get back to 2% inflation? Do we really trust policymakers not to turn hawkish as soon as inflation rises to 2%? There is a danger that price level targeting is a distraction that is “too clever by half”, a policy drawn up in academic models without sufficient regard for the real world. I get the math of how it is supposed to work in theory, but in practice its effects are likely to be diluted by general scepticism and a lack of credibility. More potent policies are needed.

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