Question A:
Under a fixed exchange rate and fully liberalized capital flows, a country loses domestic control of monetary policy.
Responses
Responses weighted by each expert's confidence
Question B:
For emerging and developing economies open to the world capital market, a flexible exchange rate confers little advantage over a pegged exchange rate in terms of economic stability.
Responses
Responses weighted by each expert's confidence
Question C:
The key feature making the US a more natural optimum currency area than the euro area is higher labor mobility.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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This is the conventional wisdom but it depends on an absence of frictions. If there are market imperfections that act as barriers maybe not.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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 Oriana Bandiera |
London School of Economics | Did Not Answer | Bio/Vote History | |
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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 Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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 Elena Carletti |
Bocconi | Bio/Vote History | ||
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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 Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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 Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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 Francesco Giavazzi |
Bocconi | Did Not Answer | Bio/Vote History | |
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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 Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Mundell showed it
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 Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Poorly designed monetary policy actions can do much damage especially if the exchange rate regime is a peg. Including to destroy the peg!
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 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The statement is true to a certain degree only. Therefore, MP still has impact albeit less than under a flexible exchange rate system.
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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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 Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
 Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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 Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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 Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
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 Richard Portes |
London Business School | Bio/Vote History | ||
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Macroprudential policies can offer some protection and hence some autonomy.
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
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 Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
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 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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 Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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The question said "fully liberalized". Understanding that as meaning that UIP holds exactly, then this is a theorem
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Bio/Vote History | ||
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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 Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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 Daniel Sturm |
London School of Economics | Did Not Answer | Bio/Vote History | |
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 John Van Reenen |
LSE | Did Not Answer | Bio/Vote History | |
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 John Vickers |
Oxford | Bio/Vote History | ||
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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I believe the evidence favours this interpretation.
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Unless it is a large country like the US and, maybe, the eurozone.
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 Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Depends on the volatility of the exchange rate in a floating regime. This is uncertainty may act as a barrier.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Especially over a hard peg.
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Oriana Bandiera |
London School of Economics | Did Not Answer | Bio/Vote History | |
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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if combined with restrictions on capital flows
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Francesco Giavazzi |
Bocconi | Did Not Answer | Bio/Vote History | |
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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In this generality, the statement is wrong. Eventually it all depends on the underlying economic policy pursued.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
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Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Depends on monetary framework, on size of country, on openness. Flexible exchange rates by themselves not enough for macro stabilisation.
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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depends on many factors including the ability of the domestic CB to control inflation
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Daniel Sturm |
London School of Economics | Did Not Answer | Bio/Vote History | |
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John Van Reenen |
LSE | Did Not Answer | Bio/Vote History | |
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John Vickers |
Oxford | Bio/Vote History | ||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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Picking the right regime is hard. Pegs can be unstable while flexible exchange rates can be volatile. There isn't always one right answer.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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It's one of the key features but there are others like a single federal authority with significant economic powers of taxing and spending.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Labor mobility in the US is not as large as most people believe. It is also key that US is not just a currency union but also a "tax union".
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Oriana Bandiera |
London School of Economics | Did Not Answer | Bio/Vote History | |
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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fiscal union not far behind
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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It is the political and fiscal union. Labor mobility is a factor, but the third or fourth important, not the key reason.
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Together with fiscal redistribution through the federal government
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Francesco Giavazzi |
Bocconi | Did Not Answer | Bio/Vote History | |
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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National political identities in euro area create additional problems going well beyond labor immobility.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The comparison between US and Euro area misses out on the key point, that defines OCA: the fiscal and political unity.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Clearly an important feature, but not clear it is most important one. Other markets, language, institutions & fiscal system matter too.
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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A fiscal union helps, too.
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
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Richard Portes |
London Business School | Bio/Vote History | ||
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Financial development and financial integration more important.
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
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Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Other features matter as well, for instance the fiscal union or the relative efficiency of the allocation of capital flows.
-see background information here |
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Fiscal transfers are key for a stable currency area. Optimality unclear.
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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there are many other factors across the EU, including lack of a fiscal union, differences in social services and regulatory standards
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Daniel Sturm |
London School of Economics | Did Not Answer | Bio/Vote History | |
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John Van Reenen |
LSE | Did Not Answer | Bio/Vote History | |
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John Vickers |
Oxford | Bio/Vote History | ||
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Labour mobility is certainly a key feature but so is political/fiscal integration
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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Political union is what makes the US a more natural optimum currency area. It would be strange if the US had multiple regional currencies.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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But also little regional heterogeneity of preferences, a common fiscal policy and an enforced no-bailout rule.
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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