Christopher Martin's picture
Affiliation: 
University of Bath
Credentials: 
Professor of economics

Voting history

Deal or no deal: The Greece standoff

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Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
The reported deal requires Greece to maintain and even increase its primary fiscal surplus. This will maintain or even worsen the dire macroeconomic situation. This is not speculation. The experience of the past few years shows this will happen,

Monetary policy and the zero lower bound (ZLB)

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Question 2: Do you agree that the benefits of reforming the monetary system to allow materially negative policy interest rates outweigh the possible costs?

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Answer:
Neither agree nor disagree
Confidence level:
Not confident at all
Comment:
These proposals are interesting but implementing them would be a leap in the dark. Would they have been helpful in the darkest moments of the financial crisis? Probably. But other options (eg Deposit Facility rates of say -1% ) are available and better understood. I would be hesitant about using these radical proposals until we have a better understanding of how they would change the monetary and credit mechanisms that modern economies rely on so heavily

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Question 1: Do you agree that it is feasible for the UK authorities to change the monetary system so that materially negative policy interest rates could be safely implemented? (In answering, you may wish to explain your reasons and define your view of 'material')

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Answer:
Agree
Confidence level:
Very confident
Comment:
There is no such thing as "the interest rate". There are hundreds of interest rates, all of which, to some degree, depend on the interest rates set by the Central Bank. The Central Bank sets three main interest rates; its'main policy rate, the rate at which it makes short-term loans to commercial banks and the rate it pays on deposits by Commercial Banks (the Deposit Facility rate). This latter rate can be negative: it has been negative in the Eurozone since July 2014. In retrospect, the Deposit Facility rate it should have been negative in the UK and US in 2010-11. That might have enabled a larger impact of QE on the "real economy" by lowering the very large reserve balances accumulated by Commercial Banks at the Central Bank. It is less clear that the Deposit Facility rate should have been negative in the Eurozone at this time as Commercial Banks in the Eurozone then faced more of an existential threat.

The Importance of Elections for UK Economic Activity

Question 2: Do you agree that the outcome of the general election will have non-trivial consequences for aggregate economic activity (employment and GDP)?

Answer:
Strongly Agree
Confidence level:
Very confident
Comment:
The difference between current Conservative and Labour spending plans is about £40 billion per year by the end of the next Parliament. On the most hard-core anti-Keynesian would argue that £40 billion a year has "non-trivial consequences". But the real issue is which party would best address the UK's long-standing economic weaknesses: inadequate infrastructure, insufficient investment, poor management and a lack of skills, factors which have combined over the years to give a dismal record on productivity. There is enough common ground in British politics for a serious attempt to put right these historical weaknesses, but little sign of any major party being willing to move out of their comfort zones in order to do this.

Question 1: Do you agree that the austerity policies of the coalition government have had a positive effect on aggregate economic activity (employment and GDP) in the UK?

Answer:
Strongly Disagree
Confidence level:
Very confident
Comment:
In 2010 George Osborne introduced austerity, arguing that the UK economy needed to be "re-balanced" away from consumption and government expenditure and towards higher investment and exports. This has not happened. Investment has fallen and the current account deficit as as high as ever. Over the past five years, productivity has fallen and real wages have stagnated. Many of the most vulnerable have become worse off but "welfare" spending has not fallen. The only positive is that the rise in unemployment was only modest.

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