Ricardo Reis's picture
Affiliation: 
London School of Economics
Credentials: 
AW Phillips 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:
Small tradeoff
Confidence level:
Not confident
Comment:
The tradeoff was not there back in March, since controlling the virus was needed to both save lives as well as to preserve economic activity. Now, uncertainty is lower (even if the danger is as high), and the marginal pain of economic losses is higher. So there possibly is a tradeoff.

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:
Large damage
Confidence level:
Confident
Comment:
Previous stocks of savings have been depleted. Uncertainty is high because the government's credibility is low so, according to the media, many do not believe the lockdown will only last until early December. And, again from media reports, it seems harder to get people to comply, as they have adjusted their risk tolerance, in which case the government restrictions will bind behavior, unlike back in March.

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:
Confident
Comment:
Back in March, by the time the UK government imposed a lockdown, people had already been voluntarily withdrawing from contact with other isolating. The people led, the government followed. There would have been a large tumble in GDP even without the lockdown, as the experience in Sweden suggests.

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:
Very confident
Comment:
First, the "economic policies in the Union" are broader than unemployment. Especially important for a central bank is the integrity of the euro-area, financial stability, and the capital market union. Second, in practice, the ECB has shown its current mandate is consistent with acknowledging trade-offs between inflation and real activity. Third, such a strong shift to unemployment as a dominant goal (as the Fed set in its review) risks re-living the mistakes of the 70s.

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

Answer:
Oppose
Confidence level:
Very confident
Comment:
Structural changes suggest an increase in the optimal target of, at most, maybe 0.5-1%. The benefits seem to be outweighed by the large costs of communicating this change to a public for whom, at the individual level, this has negligible welfare impact. Moreover, it seems reckless to risk a regime change that breaks the virtuous inattention cycle we have been in for more than a decade (people expect 0-2%, we get 0-2% regardless of shocks and policy constraints).

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