Michael McMahon'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:
No tradeoff at all
Confidence level:
Confident
Comment:
I would even think that the two are complementary; to save the economy, action will need to be taken to suppress the virus and save lives.

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:
The economy will benefit from lockdown
Confidence level:
Very 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 small portion of the decline
Confidence level:
Very confident
Comment:
The timing and precise distribution across sectors may have been different.

Should the ECB Reformulate its Inflation Objective?

Question 3: Which of the following best reflects your opinion on the following statement? “The ECB should explicitly recognize unemployment and/or economic growth as a secondary aim, secondary to its price stability mandate.”

Answer:
Disagree
Confidence level:
Confident
Comment:
I think the current mandate in the Treaty is sufficient to allow concern for issues of economic growth and unemployment to be important in the decision-making of the ECB. The issue is that the flexibility around tolerable inflation is not clearly laid out so it is possible to argue price stability, the primary mandate, is not achieved unless inflation is tightly held around 1.6%. A symmetric target would allow more definite bands in which flexibility could be shown and attention shifted to the secondary mandate.

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

Answer:
Neither support nor oppose
Confidence level:
Confident
Comment:
Here I am more nervous. It is clear that raising the inflation target, if credible, could build capacity in nominal interest rates and reduce the frequency of a binding lower bound on nominal interest rates. But I worry that announcing an increase when inflation is currently persistently low will not be credible and the move will simply increase the extent of the inflation shortfall. The ECB, or other central bank, would ideally be able to first show that they can get inflation up to a higher level, and then show that they can get it back to the existing target, before announcing the new target. Failing this, moving to a 2% symmetric target would be an improvement for the ECB in my view. As discussed above, the current objective is close to but below 2%.

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