January 2014 newsletter – Money Macro Finance Research Group – Annual Conference

The 45th Annual Conference of the MMF was held on 11-13th September at Queen Mary University of London. This Report was compiled by the Group's Chair, Jagjit Chadha, and Local Organiser, Francis Breedon.

With some 150 attendees overall and some 120 papers presented this conference was testament to the observation that UK macro is, contrary to many offhand comments, actually in rather rude health (http://www.mmf2013.org/programme). A key feature of this year’s conference was a number of initiatives aimed at attracting policy-makers to the conference and thus to make the conference a forum for discussion between academics and policy-makers as well as a high quality academic conference. We are glad to report that these efforts were largely successful with a significant participation from organisations such as the Bank of England (10 participants) and the Government Economic Service (26 participants). The MMF remains grateful for the support given to its activities by the Bank of England and HMT. The Bank kindly sponsored an event on the first evening for young researchers to interact with more senior members of the profession. As ever, the MMF is also indebted to the Manchester School both for sponsoring the conference and for producing a conference volume (previous versions can be accessed at: www.bit.ly/18Y7kOc?).

Policy Sessions
The main new policy-focused feature this year was a series of Policy sessions where some key current issues were discussed. The first of these was a panel session on the Bank of England’s remit. The panel (David Miles — BoE and Imperial; Chris Giles — FT, Roger Farmer — UCLA) was chaired by Sushil Wadhwani (Wadhwani Asset Management) and focused mainly on the policy of forward guidance announced a few weeks previously. David Miles made a spirited defence of this policy in the face of a largely sceptical panel (and audience). The panel also discussed Roger Farmer’s proposal that the Bank of England engage in large scale interventions in financial markets to offset mispricing and help stop bubbles.

The second policy session was on the future of the Euro. The session was given by Paul De Grauwe (LSE) and chaired by Gregor Irwin (Chief Economist, FCO). Paul gave a detailed description of the problems facing the Euro-Area and concluded that closer union rather than breakup was the most likely outcome.

The final policy session on Fiscal Consolidations was given by Roberto Perotti (Bocconi) and chaired by Sir Nicholas Macpherson (HMT). Roberto outlined historical instances of successful fiscal consolidations and the conditions required for success. According to Roberto’s criteria, the UK had many features that suggested a successful consolidation would be possible and may be accompanied by export-led growth. Sir Nicholas pointed out that the UK had a long history of awaiting export-led recoveries but in practice it was always consumption that led. That comment seems to have been borne out again by subsequent events.

Peter Smith's valedictory address
Another major change at this year’s conference was the introduction of a new MMF Chair. Peter Smith (York) has stepped down after 10 years diligent service and been replaced by Jagjit Chadha (Kent). In recognition of Peter’s contribution the conference held a special session which started with Jagjit thanking Peter on behalf of all MMF members for his sterling service in running the MMF. Characteristically, Peter has kept a copy of the programme for every MMF conference he has attended and so was able to give a fascinating and amusing analysis of how the MMF conference has changed over time, he then broadened his theme to take in how macro and finance in the UK had developed over that period and finished with an overview of some important themes for the future.

Keynote speakers
As always the conference was treated to some excellent keynote addresses. First, Harris Dellas (Bern), Enforcement for Sale. Stephanie Schmitt-Grohe (Columbia), The Making Of A Great Contraction With A Liquidity Trap and A Jobless Recovery. The conference closed with a typically fascinating presentation by Elroy Dimson (LBS and Cambridge) on Equity Premia Around the World. By looking across many countries across long periods of time Elroy was able to draw out many of the important characteristics of the equity risk premium and to highlight some important trends for the future.

Special Sessions
There were a number of special sessions across the three days and a common theme was banks and macroeconomic stability. The Bank of England sponsored one such session, chaired by Vicky Saporta (Bank of England) at which both theory and empirical evidence was teased out in a sequence of papers: ‘Dynamic Macroprudential Regulation by Frederic Malherbe’ (London Business School), ‘Taming the Real Estate Beast: The Effects of Monetary and Macroprudential Policies on Housing Prices and Credit’ by Kenneth Kuttner (Williams College) and Ilhyock Shim (BIS), ‘Three strikes and you’re out: a simple econometric model of systemic banking crises’, Rodrigo Guimaraes (BoE) and Macroprudential & monetary policies: Implications for Financial Stability & Welfare by Jose Carrasco-Gallego (Universidad Rey Juan Carlos) and Margarita Rubio (University of Nottingham).

Next steps
The MMF looks forward to its 46th conference in Durham on 17-19th September, but also has been able to develop a number of new initiatives for 2014, as well as the usual series of seminars. First, a PhD workshop for some 40 final year PhD students will take place in Warwick on 31st March and 1st April. And a new series, 3-4 times per year, of policy seminars will start at Queen Mary on 21st February. For details please go to http://www.york.ac.uk/res/mmf/. On a final note, there are far too many people to thank individually for the MMF activities over the course of any one year but the MMF simply could not continue without the goodwill of the Committee, its senior membership and the common wish to further the dissemination of macroeconomic research in the UK.