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

Voting history

The future role of (un)conventional unconventional monetary policy

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Question 1: Do you agree that central banks should continue to use the unconventional tools of monetary policy deployed in response to the global financial crisis as part of monetary policy under normal economic conditions?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Although similar in spirit because they affect market rates and liquidity, QE is different from standard open market operations or from any underfunding of public debt sales because of the longer maturity of bonds bought, the size of the expansion in the balance sheet and the duration of the holdings. It would be rather unusual to run up such large stocks of debt in normal times, whatever normal may be, unless the central bank lost control of its ability to influence the term structure or if changes in the overall demand for liquidity require some form of QE. So my central view is that it depends!

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
I repeat part of my previous comment. In order to maintain relativities, firms may reduce both overall labour hours or total employment numbers and the increase in the wage bill may drive up firms’ costs, which may increase the overall price level and lead to temporarily higher inflation. To the extent that higher wages may provide an incentive for productivity improvements by firms, these negative effects may be offset to some extent. On balance though I would expect unit labour costs to go up somewhat.

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Agree
Confidence level:
Not confident
Comment:
The introduction of a national living wage target of 60% of median earnings by 2020 for over 25s is an attractive and eye-catching objective, as the target reflects many social scientists’ views about the threshold definition of poverty, which is 60% of median income. The increases in wages for those people in work at the bottom of the pay ladder and possibly some increases for those nearby in the distribution, in order to maintain relativities, may reduce both overall labour hours or total employment numbers and possibly drive up firms’ costs, which may increase the overall price level and lead to temporarily higher inflation. To the extent that higher wages may provide an incentive for productivity improvements by firms, these negative effects may be offset to some extent.

Brexit and financial market volatility

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Question 2: Do you agree that the possibility of Brexit significantly increases uncertainty and volatility in financial markets and the economy in general?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Financial markets are already rather sclerotic and this event is simply another global factor alongside oil prices, emerging economies, the US election, Fed policy...I could go on...that markets seem to be unable to handle very sensibly. Any increase in uncertainty may impact on consumption and investment plans, obviously, but given that the referendum will resolve membership uncertainty in one direction or the other, it will allow us to get on with the question of Britain's future with at least this question resolved for a generation or more.

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Question 1: The value of the pound fell sharply this week. Do you agree that the public debate on Brexit can be expected to (continue to) lead to a substantially higher level of exchange rate volatility in the upcoming months?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Sterling is already rather fragile as the likelihood of a policy tightening has fallen and the recent deterioration in the external position also means that it is vulnerable to shocks. The referendum on EU membership will inject considerable uncertainty into the question of the correct path for Sterling and so we can also expect the release of polling data to lead to sharp swings in the exchange rate.

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