Nicholas Oulton's picture
Affiliation: 
London School of Economics
Credentials: 
Senior Visiting Research Fellow

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:
No role
Confidence level:
Very confident
Comment:
There is already pressure to include climate change in monetary policy decisions. Should anything be left out? How about making race or gender equity one of the goals of monetary policy? Or should crushing China be on the list too? Pretty soon any chance of an intellectually consistent framework under which a central bank could be held democratically accountable for its success or failure disapperars.

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

Answer:
Small
Confidence level:
Confident
Comment:
Tighter monetary policy works by raising unemployment (amongst other things). This is likely to increase poverty though not necessarily inequality. But then you have to ask: why was tightening considered necessary? The question requires us to compare at least two different monetary policy regimes, the current one and some alternative such as price level targeting or Friedman's k% rule. Which is better for inequality is not obvious but arguably any difference is small.

Central Bank Digital Currency for the UK

Question 2: What effect will the introduction of a CBDC have on UK banks?

Answer:
Moderate harm
Confidence level:
Confident
Comment:
The whole point of greater competition is that it does harm incumbents whose monopoly profits are reduced. They are then forced either to innovate to keep up or shrink. A CBDC would move the banks towards a greater reliance on equity financing which would improve bank safety and is something they have resisted fiercely since the global financial crisis. If banks do indeed have expertise in allocating funds to borrowers then they can still exercise this to make profits even if they are largely equity-financed.

Question 1: How beneficial would it be to the UK economy for the Bank of England to introduce a central bank digital currency in some form in the upcoming decade?

 

Answer:
Beneficial
Confidence level:
Very confident
Comment:
Greater competition for UK banks would be a good thing. As far as retail customers are concerned banks only innovate when really pushed by forces outside the banking sector.

Fiscal Rules in the European Monetary Union

Question 2: Which of the following is the one reform you would choose to improve fiscal rules?

Answer:
Fiscal councils or fiscal standards
Confidence level:
Confident
Comment:
The problem with rules is that they are impossible to draft in a way allowing for all contingencies. Even for monetary policy which is arguably simpler than fiscal policy rules have been abandoned in favour of a framework (e.g. inflation targeting) which leaves a large role for discretion. But then the dilemma pointed out in my answer to question 1 rears up again: how to persuade countries like Germany to agree to flexible standards rather than rigid rules?

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