Wendy Carlin's picture
Affiliation: 
University College London
Credentials: 
Professor of economics

Voting history

ECB Monetary Policy and Catch-up Inflation

Question 2: Which of the following policies is the most desirable to meet the ECBs objective to achieve its mandate of “price stability” as you understand this term.

Answer:
Inflation targeting
Confidence level:
Confident
Comment:
The reasons given above support an inflatin target. Price level targeting is attractive in some ways for the central bank in a common currency area because it is the real exchange rate (and hence changes in price levels across members) that affects member countries but may not be on the radar of wage-setters oriented to an inflation target. But price level targeting is difficult to implement when it requires cuts in nominal wages.

Question 1: To what extent do you agree with the following statement? “The European Central Bank should systematically allow for inflation to exceed its target to compensate for periods of below target inflation.”

Answer:
Disagree
Confidence level:
Confident
Comment:
The ECB's problem for a decade has been how to get inflation up to 2%. By making this explicitly its target, it may help anchor expectations more successfully. To the extent it has been successful, inflation targeting has worked because the objective is easy to measure and to communicate. A more complex objective would make it more difficult to communicate success or failure, and just as importantly, to explain why some changes in inflation should be 'looked through'. For these reasons, a higher inflation target is a better change than switching to AIT.

Monetary Policy and Inequality

Question 2: What role should inequality play in the monetary policy decisions (interest rate policy and quantitative easing)?

Answer:
Substantive role
Confidence level:
Confident
Comment:
By this answer, I mean that CBs should be improving their understanding of the determinants of changes in income and wealth inequality in order to understand better the nature of business and financial cycles, and to learn about how their decisions in line with their existing mandates affect outcomes for inequality.

Question 1: How large is the impact of monetary policy on the joint distribution of income and wealth?

Answer:
No opinion
Confidence level:
Not confident
Comment:
By 'no opinion', I mean 'it all depends', as the cited literature suggests. The effects on both income and wealth inequality come through a wide variety of channels, affecting different parts of each distribution and being affected by the specific cause of the phase of the business cycle (e.g. loose monetary policy in a post housing bust recession would be expected to have a different effect on wealth inequality than a recession caused by an external supply shock) and by national institutions and tax rules.

Fiscal Rules in the European Monetary Union

Question 2: Which of the following is the one reform you would choose to improve fiscal rules?

Answer:
Fiscal councils or fiscal standards
Confidence level:
Not confident
Comment:
Unenforceable rules especially for overly tight fiscal policy remain a problem with proposals to reform the rules. Perhaps the experience with COVID makes the time right to push for expansion of EU fiscal capacity / mutual insurance as the norm in the form of automatic stabilizers. This could complement the work of fiscal councils working to common standards.

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