David Smith's picture
Affiliation: 
Sunday Times
Credentials: 
Economics editor

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:
Disagree
Confidence level:
Confident
Comment:
The negative impact on growth from the measures outlined is likely to be offset in whole or in part by the positive impact of the removal of the uncertainty over Greece's continued membership of the euro, if indeed that is the case.

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:
Disagree
Confidence level:
Confident
Comment:
In the circumstances of another shock or recession, materially negative interest rates could reduce rather than boost confidence. Even the fact that the authorities were reforming the monetary system to allow for materially negative rates could have a negative effect. Other tools are available.

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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:
Strongly Disagree
Confidence level:
Very confident
Comment:
Marginally negative policy rates are sometimes of use but materially negative rates, of 2%, 3% or more, would lead to significant distortions. Other tools, such as QE or credit easing, are greatly preferable.

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:
Agree
Confidence level:
Very confident
Comment:
The fiscal policy differences between the parties have narrowed but still exist and there are also important supply-side differences. The outcome of the election could give us an interesting test of the long-term impact of higher taxation and greater government intervention on growth.

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:
Agree
Confidence level:
Very confident
Comment:
The simple answer would be that austerity has reduced growth but we cannot know the counterfactual, which is that a failure to reduce the deficit could have had serious consequences. Critics of austerity tend to underestimate the extent to which Britain was close to a full-blown fiscal crisis in 2010.

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