Roger Farmer's picture
Affiliation: 
University of Warwick
Credentials: 
Professor of Economics

Voting history

Will COVID-19 Cause Permanent Damage to the UK Economy?

Question 1: How quickly will the economy rebound (e.g. to the pre-pandemic trend) once the COVID-19 pandemic has been contained and absent major policy interventions? 

Answer:
The economy will rapidly return to its pre-crisis growth trend, but there will be a permanent effect on the level of GDP
Confidence level:
Confident
Comment:
My best guess, is that GDP will recover by somewhere between a half and two thirds of the way to its previous trend growth path before the end of the year as employees return to jobs that were preserved. The remaining half to one third of the recovery will be slower as the economy transitions to a new normal with some industries shrinking and others taking their place. There is some evidence that very low unemployment is correlated with slow growth which raises the intriguing possibility that initially at least, we will see productivity growth that is noticeably higher than the sluggish numbers that have characterized the past decade. Policy has a huge role to play in determining the nature of the recovery and I have little confidence that the recovery will be well managed given the inadequacy of the models that guide current thinking.

COVID-19 and UK Public Finances

Question 2: What is the best way to (eventually) reduce public deficits and debt?

Answer:
Perpetuities
Confidence level:
Confident
Comment:
Concern for high debt levels (as opposed to high deficits) is overblown.

Question 1: How urgently should the UK government address the rise in public debt?

Answer:
There is no need to take or announce any budgetary actions to reduce the deficit or the public debt until the end of the pandemic
Confidence level:
Confident
Comment:
I favor monetary financing in the short run that will, and should, lead to price increases. That view is conditioned on a policy in which large deficits are temporary.

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:
Joint borrowing by member states (e.g. Coronabonds)
Confidence level:
Confident
Comment:
A number of solutions are possible. All of them involve greater integration and the creation of a US style federal Europe. My point prediction is that this will not happen.

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:
>20% of GDP
Confidence level:
Extremely confident
Comment:
The EU desperately needs a mechanism to allow for permanent fiscal transfers from rich to poor regions. No other large monetary union anywhere in the world operates without regional transfers. The alternative more likely outcome is the breakup of EMU. It’s crunch time for the European experiment.

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