Jagjit Chadha's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Professor of economics

Voting history

A “new” UK industrial strategy ?

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

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Answer:
Agree
Confidence level:
Confident
Comment:
We certainly need to think about how develop collaborations between the private sector, the knowledge base and government. But I do not yet know what now mean by an industrial strategy: picking winners may freeze the economic structure and distort incentives. The real policy may require micro or regional level analysis of public good and financial constraints faced by industries.

The Future of Central Bank Independence

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Question 2: Do you agree that the traditional argument that less central bank independence leads to higher inflation will (still) be relevant over the next 48 months in Western economies?

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Answer:
Agree
Confidence level:
Very confident
Comment:
We tend to think that central bank independence means that people will believe the inflation target and act in a consistent manner. This is because the central bank has an incentive to hit the target in a way that politicians do not. It may not so much that inflation will be higher or lower, though admittedly we do think in terms of a positive inflation bias, but that there will be more uncertainty over its level if we unwind central bank role in its control.

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Question 1: Do you agree that central bank independence in the Eurozone and the UK will decline over the next 48 months?

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Answer:
Agree
Confidence level:
Not confident
Comment:
I think it is a risk that because of a perception of poor economic performance and the increasing role of central banks in bank regulation, as well as clear involvement in fiscal policy through extraordinary monetary policies that the framework for independence in the operation of monetary policy will have to be rethought. One the central bank gets involved in more than objective, trade-offs may start to appear and some discussion on the social welfare function may be needed. (I considered some of these issues in this piece last month: http://www.niesr.ac.uk/blog/friday-flyer-dependence-day-old-lady#.WFZ7tGKLRdg)

German Council of Economic Experts' view of ECB policy

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Question 2: Do you agree that the ECB's monetary policy masks structural problems of member states?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Structural problems simply cannot be addressed by aggregative monetary policy they are more likely to exposed by them because there are such differences in regional composition of the aggregate.

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Question 1: Do you agree that exceptionally loose monetary policy by the European Central Bank is no longer appropriate?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Actually policy could be tightened somewhat and still be exceptionally loose by historical standards. So I interpret the questions as asking whether the process of normalisation ought to begin and as a corollary whether markets ought to start preparing for some exit from balance sheet policies and a return to positive interest rates. I think it is still a little early to reserve the policies but it is not too early to explain the conditions under which policy normalisation might occur. We need to start by clarifying the target for the ECB of being close too but below 2% inflation, which is both asymmetric and suggests a negative inflation bias. A simple 2% target with 1% bands would be a start.

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