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

Voting history

Surging Inflation in the UK

Question 2: Will the inflation surge of 2021 prove persistent?

Answer:
No
Confidence level:
Not confident
Comment:
On the aggregate demand side, deflationary forces from the fiscal and monetary sides combined with the squeaze on living standards dampening consumption of lower and middle income households will act to reduce inflation; on the supply side some of the global factors exacerbating inflationary pressure will likely ease. The damage to potential output is still unclear, however. Meanwhile, there is little sign of systematic wage increases building in lagged inflation. So, on balance, inflation may ease back somewhat in 2023.

Question 1: Which of the following factors is the primary reason for the rise in inflation in 2021?

Answer:
No opinion or other
Confidence level:
Confident
Comment:
For the UK, base effects, energy price rises, and the pandemic-induced distortion in consumer demand from services toward durable goods (interacting with a similar global pattern plus supply chain disruption) account for the rise in inflation in 2021. So, a cocktail of supply-side factors was responsible (rather than excess aggregate demand or inflation expectations).

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.

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