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

Voting history

Monetary Policy and Inequality

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:
To the extent that inequality changes the transmission of policy or shocks to the economy, it is important for monetary policymakers to be aware of developments including those that come from its own past actions. Should the central bank try to affect inequality directly? I don't think so. The central bank does not have good tools to deal with inequality; fiscal policy can be more targeted and it is important that the objectives of redistributive policies reflect the preferences of the electorate.

Question 1: How large is the impact of monetary policy on the joint distribution of income and wealth?

Answer:
Large
Confidence level:
Confident
Comment:
There are clearly channels of monetary policy (and also financial policies) that benefit asset prices and therefore directly affect the position of those that hold positive net financial assets. The effect of QE on financial assets is one obvious one, but also effects on house prices which likely affect a wider number of households.

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.

 

Answer:
Agree
Confidence level:
Very confident
Comment:
Though the information from financial balances can be important inputs into the monetary policy process - for example, because it can provide information on the transmission of monetary policy through the banking system.

Proposition 1: The Bank of England’s mandate should be officially modified to take housing or other asset prices into account in its monetary policy decisions.

Answer:
Disagree
Confidence level:
Confident
Comment:
Though I disagree that house prices (or other asset prices) should be the target, I acknowledge that there is a difficulty for central bank. The general public that they serve see house prices as part of inflation. And recent years have seen house prices rising quite strongly while CPI inflation, the central bank target, has been quite subdued.

The ECB’s Green Agenda

Question 2: Would you support changing the ECB’s mandate to incorporate the EU’s target of carbon neutrality by 2050, if such a change is deemed legally necessary to adopt your preferred approach?

Answer:
Yes
Confidence level:
Confident
Comment:
There is a need to make many reforms to the EU treaties to bring macro-policymaking more fit for purpose in a changed economic environment; ECB mandate adjustments could and should form part of those adjustments.

Pages