Pietro Reichlin's picture
Affiliation: 
Università LUISS G. Carli
Credentials: 
Professor of Economics

Voting history

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:
Agree
Confidence level:
Confident
Comment:
The problem with the dual mandate is that the ECB is the only central bank in the world that is not backed by a state and a political authority. This exceptional degree of independence of unelected officials requires strong constraints on their policies, but it should not prevent monetary policy to respond to EMU wide business cycles. Ideally, unemployment and growth targets should be left to national governments. However, there are many reasons why counter-cyclical fiscal policies are bound to be less effective in the EMU. Among these are the limited fiscal space of some countries (exacerbated by fear of speculative attacks on sovereign debts) and the non internalized EMU wide benefits of national expansionary policies. Hence, strict adherence to the single mandate is dangerous and not realistic. Progressing toward a political union where federal institutions attain more legitimacy may overcome the conflict between independence and dual mandate.

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

Answer:
Support
Confidence level:
Very confident
Comment:
See my answer to the previous question

Question 1: Which of the following best reflects your opinion on the following statement? “The ECB should explicitly state that it will allow inflation to temporarily exceed the 2% target following extended periods of low inflation.”

Answer:
Strongly agree
Confidence level:
Very confident
Comment:
There is large consensus that structural problems (demographics, pace of innovation, excess savings) are behind a long term fall of real interest rates, so that the range of inflation rates compatible with the zero lower bound is shrinking. On top of that, higher inflation may be a good way to make the surge in government debts more sustainable.

The Eurozone COVID-19 Crisis: EU Policy Options

Question 2: What is the best mechanism to pay for economic support provided by and to EU member states to combat the COVID-19 crisis?

Answer:
Monetary finance
Confidence level:
Confident
Comment:
Enlarging the EU budget to a limited extent and deploying a specific credit line within the ESM and EIB is certainly a good idea, but, given the lack of fiscal and political integration, I do not consider these options to be up to the task of providing the amount of financing that is necessary. Southern Europe will end up with large fiscal deficits and a much larger stock of government debt in investors' portfolios. Although I think that there are margins for a further increase in overall public debt in the EU, I think that the ECB should overcome any residual regulatory constraint on the way to absorb a much higher amount of sovereign securities to avoid financial disruptions and speculative attacks.

Question 1: What is the total size of funding that you would advocate at the EU level in support of its members to weather the COVID-19 crisis this year?

 

 

Answer:
5-10% of GDP
Confidence level:
Confident
Comment:
There may be variation across EU countries depending on the impact of the COVID-19. I evaluate 10% of GDP for the worst hit countries (France, Italy, Spain).

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