Angus Armstrong's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Director of Macroeconomic Research
Visiting Professor, Imperial College London

Voting history

Global risks from rising debt and asset prices

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Question 2: Is the loose monetary policy of major central banks responsible for the recent increase in global leverage or asset values?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Central banks themselves have argued that QE in part functions through rising asset prices so this hardly seems controversial. However, there is a deeper issue that conventional monetary policy also affects risk prremia. There has been some initial attempts to model spreads in central bank policy reaction functions which is welcome, but it is far from clear that risk taking can be summarised by a single metric. This creates a spil-over between monetary and financial policy which probably requires some further thought.

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Question 1: Does the world economy face heightened risks arising from an excess of public and private debt and/or inflated asset prices?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Debt burdens in most advanced countries and many developing countries are at elevated levels which, cet. par., implies higher risk. To the extent that de-leveraging has occurred, debt burdens are only back to 2006-7 levels. I don't take a great deal of comfort from this. Economies were fragile in this period and the occurance of the crisis was not orthogonal to this fact. It is also worth noting that private debt burdens in the UK are rising slightly again. Note, this is not an argument for further austerity.

A “new” UK industrial strategy ?

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Question 2: Do you agree that the UK needs a new regional policy?

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Answer:
Strongly agree
Confidence level:
Extremely confident
Comment:
For many reasons, not least the legitimacy of our external policy and the integrity of the union. Obvioulsy this needs to be evidence based. I do not think that tax subsidies are necessarily the best way. But productivity levels and trends have become so divergent as long as London suffers some degree of slowdown then there is no obvious area which can offset this. This requires a real rethink of poliyc. For example, identifiable public expenditure is greater in London and the South than the North and how do we include our public support for tertiary education across the UK. Can we have technology only graduate schools in the North? Or chemical science in Teeside rather than London.

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Question 1: Do you agree that the UK needs a new industrial policy?

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Answer:
Strongly agree
Confidence level:
Very confident
Comment:
This should combine a strong element of regional policy. Output (GVA) per wokforce shows enormous variation accross the UK and understanding the challenges in the low productivity areas would be an obvious way to raise national productivity. This should be complemented by tertiary education policy and the regions.

The Future of Central Bank Independence

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Question 3: More generally, do you agree that it is desirable to maintain central bank independence? Again focus on the near future, say next 48 months.

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Answer:
Strongly agree
Confidence level:
Confident
Comment:
I agree with the need to maintain central bank independence but over a narrow remit. This solves a clear coordiantion problem. I think it would be a retrograde step to erode this position. However, I do not think the Bank should be the only advocate of financial stability policies, our FSB contributions or expect a free ride over its position on the European debate, fiscal policy or many other issues the Bank gets involved with. These are inherently political.

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