Michael McMahon's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of Economics

Voting history

Causes for Weak Long-Run UK Growth

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:
Confident
Comment:
This follows from the last part of my last answer.

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:
Brexit
Confidence level:
Confident
Comment:
I think in recent years, I think that Brexit has been the dominant cause of macroeconomic weakness in the UK. Of course, before 2016 the UK had already shifted to a much lower growth than in the pre-GFC period which has nothing to do with Brexit. I think there are two important considerations in that period. One is the extent to which GDP growth before the financial crisis was potentially artificially high by the easy credit conditions created in response to firms using financial engineering to exploit explicit or implicit government support (as in Malherbe and McMahon, 2022). The other relates to the effect of austerity on provision of public services, and the low level of public investment. I am not aware of a large body of research on these questions so I am somewhat more uncertain about the strength of this second effect. (There is some research on this - one related to public capital stock is Lynde and Richmond, 1993).

Prospects for Euro Area Inflation in 2023

Question 3:  Under its current policy trajectory, with rates peaking at 3.5%, which of the following is most likely?

Answer:
ECB policy interest rates will be too low in 2023.
Confidence level:
Confident

Question 2: Relative to market forecasts of the ECB’s MRO rate peaking at 3.5%, which of the following is more likely during 2023?

Answer:
The MRO rate will peak above 3.5%.
Confidence level:
Confident

Question 1: How likely is it that peak headline euro area inflation is behind us?

Answer:
Likely
Confidence level:
Confident
Comment:
But the peak being behind us and the inflation challenge for central banks being behind us are not necessarily the same thing. If inflation comes down and settles in the 4-5% range, it still poses a big challenge for policymakers to determine how quickly to bring it back to target.

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