Roger Farmer's picture
Affiliation: 
University of Warwick
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:
Public debt
Confidence level:
Confident
Comment:
Let me qualify. The level of public debt is much less important than the rate of growth of public debt. The danger is that the public finances will become dependent on nominal borrowing that will become politically, very hard to reverse.

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

Answer:
The BoE will be unable to avoid inflation exceeding its target
Confidence level:
Not confident
Comment:
Making statements about future inflation is a dangerous game. But in evaluating the likely alternatives, the scenario promoted by Goodhart and Pradjan is, IMO, more likely than the alternatives. Inflation, as we all know, is almost and everywhere a fiscal phenomenon (to misparaphrase Friedman). Once national treasuries become hooked on deficit finance, it will be very difficult for them to put down the crack pipe.

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:
Not confident
Comment:
We have little understanding of what determines growth and all projections of future GDP growth should be give very wide confidence bounds. There are too many unknowns to make a confident projection.

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:
Between 2% and 5%
Confidence level:
Confident
Comment:
GDP is well described by non-stationary process. After a major shock, and COVID certainly qualifies as major, there is little or no tendency to return to a give path.

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:
For better or worse, there is a difficult tradeoff here. The lives saved are predominantly the elderly and the sick. The livelihoods preserved are predominantly the poor and the young. I would add that lockdowns do not just affect livelihoods, they contribute to deaths through despair, suicide, and faliure to access medical care for otherwise treatable conditions.

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