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

Voting history

Brexit and financial market volatility

======================================================================

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

======================================================================

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.

======================================================================

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?

======================================================================

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.

Market Turbulence and Growth Prospects

======================================================================

Question 2: Do you agree that the falls in share prices, low oil prices and the slowdown in some emerging market economies will have a significant negative impact on the UK’s economic recovery?

======================================================================

Answer:
Disagree
Confidence level:
Very confident
Comment:
The falls in share prices may be temporary and a response to the understanding that monetary policy will eventually normalise, which itself tells us that the economy is in recovery. Lower oil prices help countries that are net consumers of oil and also help households real incomes. The slowdown in some emerging economies may not matter so much if the UK does not export a great there or if there continues to be growth in markets where the UK does trade. In any case, the final arbiter of short run trends in the recovery will the monetary-fiscal policy stance, which can always be loosened with forward looking policy by delaying the date at which interest rates are expected to rise and/or the surplus attained.

======================================================================

Question 1: Do you agree that economic growth prospects for the global economy have seriously deteriorated?

======================================================================

Answer:
Disagree
Confidence level:
Confident
Comment:
The recoveries in the Anglo-Saxon economies continue to look rather robust. Given expectations of higher policy rates in the Anglo-Saxon world, the emerging economies will have to continue to deal with capital outflows and some will respond with better fiscal and financial structures, others perhaps not - so it will not be universally bad news. Parts of the Euro Area continue to suffer but that is not news this year. The fall in oil prices represents good news for consumers of oil and bad news for producers and traditionally this was thought either to be at least neutral globally or, more likely, positive given higher propensities to consume in advanced countries. So whilst the outlook may not be great it does not seem palpably worse.

Autumn Statement & Charter for Budgetary Responsibility

======================================================================

Question 2: Do you agree that the Charter for Budgetary Responsibility is helpful in underpinning the credibility of fiscal policy?

======================================================================

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Whilst I am in favour of thinking about how to underpin the credibility of fiscal policy, I am not quite sure that this Charter succeeds. It is specified in terms of a surplus on public sector net borrowing without being clear on the exact magnitude nor on some notion of what a sensible long public debt to GDP ratio might be and what factors determine that ratio. I wonder also to what extent this signals a change in deficit policy or just reveals that basic approach to finances that HMT uses, as my guess is that this is the kind of approach that has always been followed.

Pages