Simon Wren-Lewis's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

The UK Productivity Puzzle

Question 1: Which of the following was the most important cause for the slowdown in UK productivity growth?

Answer:
Low demand (including due to the financial crisis, austerity policies, or Brexit)
Confidence level:
Confident
Comment:
Until 2007, the UK largely bucked an international slowdown in productivity growth, partly but not all because of financial services. Since the GFC productivity growth has been below international levels. I have argued that this is associated with two events that greatly increased uncertainty about future demand growth: austerity and the consequent delayed and weak recovery, and Brexit. Without these two events, UK productivity growth would have been closer to international levels.

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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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
There are many reasons for this, including the point made in answering the previous question. Most important, however, is the asymmetry of costs if policy is wrong. Tighten too late and we get a modest inflation overshooting. Tighten too early and, because inflation is sticky near zero, it may be years before central banks realise their mistake, leading to very large welfare losses.

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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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Answer:
Disagree
Confidence level:
Confident
Comment:
There are many reasons why the NAIRU may have fallen over the last decade. One that is seldom talked about is productivity. Productivity growth in many countries has been low since the financial crisis. However it seems unlikely that this reflects an equivalent decline in fundamental technical progress. Instead what seems more likely is that many firms have put off investment in labour saving improvements because of weak growth. If labour does become scarce, we are more likely to see a catch up in productivity growth than rising inflation.

Global risks from rising debt and asset prices

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Question 2: Is the loose monetary policy of major central banks responsible for the recent increase in global leverage or asset values?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Asset values yes - that was the inevitable consequence of QE. It may have also encouraged additional leverage, but responsibility for leverage lies with macroprudential policy. The moment that we make interest rate/QE policy responsible for financial stability as well as inflation is the moment the consensus around assigning macro stabilisation to monetary rather than fiscal policy ends.

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Question 1: Does the world economy face heightened risks arising from an excess of public and private debt and/or inflated asset prices?

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Answer:
Disagree
Confidence level:
Not confident

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