Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?
I am in favour of continuing with a gradual rate tightening cycle, whilst simultaneously offsetting potential harmful effects on the asset markets through active macro prudential policies. In the current environment, the Bank pays interest on reserves. It is operating a ‘floor system’. Raising the rate on reserves at the same time as raising the overnight lending rate will not lead to monetary tightening in the same way as it would in a world where these rates were allowed to diverge: (a corridor system). Responsibility for maintaining ‘strong sustainable balanced growth’ should be transferred to the Financial Policy Committee, strengthened with the tools to conduct more aggressive interventions in the asset markets.
The Phillips Curve has not been a good characterization of data in any advanced economy since Phillips published his paper on the relationship between wage inflation and unemployment in the UK in 1958. Subsequent empirical developments that purport to find a Phillips Curve in data are not estimating the same relationship uncovered by Phillips, They are instead estimating the “expectations augmented” Phillips Curve. This is an irrefuatable theory that contains an unmeasurable concept; the average subjective expectations of markets participants. The Phillips Curve was a reduced form relationship that existed during a period when world monetary arrangements were governed by the Gold Standard. There is no reason to expect the same reduced form relationship to hold in a world of fiat monies. In my view, central banks and most practicing macroeconomists are currently working with a flawed theory.
See my answer to question 1. Bitcoin and other cryptocurrencies are asset price bubbles that, if allowed to grow at current rates, will prove incredibly destructive to the financial system when they burst. They WILL burst.
Question 1: Do you agree that cryptocurrencies are currently a threat to the stability of the financial system, or can be expected to become a threat in the next couple of years?
Bitcoin can go much higher. But then it will fall much further when the crash comes. Ironically, that crash is likely to be triggered by regulation which becomes more likely, the more successful Bitcoin becomes. Central banks should act sooner rather than later. To be truly successful, Bitcoin must become a currency: not a speculative asset. If that happens, it will generate a reversion to a gold standard like regime in which central bank control of the currency becomes irrelevant. Central banks cannot and will not let that happen.
Over the medium to long term, wealth is a significant driver of employment and changes in employment are an important driver of changes in real GDP. Housing wealth is over half of all UK wealth and, if house price growth falls or reverses, there will be a significant feedback effect on to measured growth.
The CFM surveys informs the public about the views held by prominent economists based in Europe on important macroeconomic and public policy questions. Some surveys focus specifically on the UK economy (as the CFM is a UK research centre), but surveys can in principle focus on any macroeconomic question for any region. The surveys shed light on the extent to which there is agreement or disagreement among these experts. An important motivation for the survey is to give a more comprehensive overview of the beliefs held by economists and in particular to include the views of those economists whose opinions are not frequently heard in public debates.
Questions mainly focus on macroeconomic and public policy topics. Although there are some questions that focus specifically on the UK economy, the setup of the survey is much broader and considers questions related to other countries/regions and also considers questions not tied to a specific economy.
The surveys are done in collaboration with the Centre for Economic Policy Research (CEPR).
Labour Markets and Monetary Policy
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Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?
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Question 1: Do you agree that a strong labour market is a good indicator of building inflationary pressure?
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Bitcoin and the City
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Question 2: Do you agree that the regulatory oversight of cryptocurrencies needs to be increased?
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Question 1: Do you agree that cryptocurrencies are currently a threat to the stability of the financial system, or can be expected to become a threat in the next couple of years?
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House Prices and the UK economy
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Question 2: Do you agree that a more widespread weakening of the UK housing market will slow UK GDP growth significantly?
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