Robert Kollmann's picture
Affiliation: 
Université Libre de Bruxelles
Credentials: 
Professor of Economics
Research Fellow, CEPR
PhD, University of Chicago

Voting history

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
Comment:
While there is much uncertainty about the speed of recovery over the next 1-4 years, there is no reason to expect a decline in the growth rate of potential output over a longer period.

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:
Not confident
Comment:
Obviously, there is a lot of uncertainty. But households and firms have been forced by the Covid crisis to upgrade their IT skills and equipment, and new ways of organizing office work, production and distribution have been invented. In addition, the crisis could accelerate the transition to greener technologies. This could partly offset the negative effects of higher corporate and government debt. The medium- to long-term damage could therefore be fairly moderate.

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:
Neither agree nor disagree
Confidence level:
Not confident
Comment:
This might make the job of the ECB too "political" and contentious. It seems better to keep the simple price stability mandate. We all know that, in crisis times, we can trust the ECB to fight for growth and employment. Just think of Draghi's "whatever it takes" speech.

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:
Confident
Comment:
This is not the time to open that Pandora's box. All efforts by European policy makers should focus on overcoming the Covid crisis and boosting long-term growth (through structural and fiscal reforms), which would increase real equilibrium rates.

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:
Disagree
Confidence level:
Confident
Comment:
To keep her credibility, the ECB needs clear and verifiable objectives. The freedom to “allow inflation to temporarily exceed the 2% target following extended periods of low inflation” seems too vague: What is the meaning of "temporary"? By how much would inflation be allowed to overshoot?

Pages