Thursday, 1 August 2013

'' I am a Canadian in London....''

Despite the humorous and fancy title of this post, it is a serious take on the new Governor of the Bank og England. Mark Carney, which is a Canadian born Economist and a reputed banker is taking over Sir Mervyn King in the command of the ''Old Lady of Threadneedle Street''. We all which him well. But to begin with, Mr.Carney won't surely have an easy and handsome time in the years ahead, and for sure the prescriptions for the UK economy will not be the same as other advanced economies like the US or the Eurozone.

As the featured video in this post from FT's correspendent Chris Giles in talk with John Authers notes, Mark Carney will face a conumdrum dealing with his new remit for the Bank of England. On the one hand Mr. Carney will be willing to taper the ongoing monetary stimulus of the Bank to the economy, which still faces low growth figures, but on the other hand he will be advised not to take same prescription of his counterparts from the FED, and looking at this problem from the point of view of the trade-off between the level of employment and Economic growth.

The two FT's columnists and reporters quite righlty indicate to us all the nonlinearity in the relationship between employment or unemployment figures and the Macroeconomic variable of the variation in Growth Domestic Product. In the UK economy, even if the Growth figure is pretty dismal or negative, the employment data has been resilient and strong.

That said, Mr. Carney might well be tempted to target in his policy framework the level of nominal GDP, and not the real GDP figure and be able to sort himself out of one of his remit conumdrums. Along the way he will certainly enjoy the magnificent City of London.

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