Daily Archives: May 8, 2012

Claire Jones

The Bank of England’s Monetary Policy Committee might well plump for more money printing on Thursday.

But, if the committee were to back further asset purchases, would it do any good?

The Bank’s view is that the first £200bn-worth of quantitative easing boosted growth by between 1.5 per cent and 2 per cent. It expects the second round of asset purchases to have a similar effect.

Not everyone buys the MPC’s line, including the former Bank economists at Fathom Consulting, who argued today that Threadneedle Street has misdiagnosed the problem befalling the UK economy.

Rather than spur growth, Fathom argues that further gilt purchases would merely stoke inflation, eroding the Bank’s credibility in the process.

For Fathom, more QE would represent a repeat of the mistakes seen in the 1970s, where the misdiagnosis of the UK’s economic ills led to a series of policy errors, the result of which was years of high inflation and low growth. Read more

Roger E A Farmer, Distinguished Professor and Chair, UCLA Department of Economics

The US recovery has stalled, the UK has fallen back into recession and most of Europe is mired in a debt quagmire to which there appears to be no quick exit. It is against this background that Charles Evans, president of the Federal Reserve Bank of Chicago, has come out aggressively in favor of additional Fed actions.

But what can the Fed do to alleviate the unemployment problem?  What should it do?

In a series a recent research paper1(here), I have shown that there is  stable connection between the stock market and the unemployment rate and I have argued2(here) that this connection is causal. The stock market crash of 2008 caused the Great Recession. If this relation is truly causal, then central banks can do a great deal to alleviate persistent unemployment.

 Read more