Michael Wickens's picture
Affiliation: 
Cardiff Business School & University of York
Credentials: 
Professor of economics

Voting history

Should We Worry About Post-Covid Inflation?

Question 2: Which of the following will be the greatest inflationary (or deflationary) force facing the UK economy?

Answer:
The growth rate of the real UK economy
Confidence level:
Very confident
Comment:
The main cause of the expected increase in inflation will be none of the above. It is the excess accumulation of household savings and the effect this will have on demand and supply in the future as lockdown is eased. The build up of monetary liabilities at the Bank through purchases of gilts need not be a cause of inflation as the Bank can sell off these gilts. The main issue for government policy is how to deal with its build up of debt. There will need to be a balance struck between correcting the deficit through higher taxes, lowering the level of debt to keep debt interest payments sustainable and how much debt to buy back or to continue monetising. These are not problems for the Bank alone. Monetary and fiscal policy co-ordination will be required.

 Question 1: Which of the following scenarios is most likely to hold on average for most of the upcoming decade?

Answer:
Inflation will be at the current target rate
Confidence level:
Extremely confident
Comment:
There is no good reason why the Bank of England should change its inflation objective. The question is whether it will succeed in doing so. I expect inflation to increase as the economy picks up after the pandemic. This success of the Bank will depend in large part on whether it correctly identifies the likely sources on this increase in inflation. This is question 2.

Post Covid-19 Potential Output in the Eurozone

Question 2: How much lower will the potential growth rate of GDP in the Eurozone in 2025 be due to Covid-19 relative to pre-Covid forecasts?

 

Answer:
No different
Confidence level:
Confident

Question 1: How much lower will the potential level of GDP in the Eurozone in 2025 be due to Covid-19 relative to pre-Covid forecasts?

 

Answer:
2% or less
Confidence level:
Confident

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:
Large tradeoff
Confidence level:
Very confident
Comment:
The government has completely failed to give any analysis of the trade-off between lives and livelihoods. This alone suggests that the cost in livelihoods is likely to be large and therefore unmentionable. Most of the academic research indicates that the benefit in lives is less than the cost in GDP. Many of the current lockdown measures - especially those involved in outdoors activities - make little sense even in terms of lives saved.

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