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

Voting history

Deal or no deal: The Greece standoff

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Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

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Answer:
Strongly Disagree
Confidence level:
Confident
Comment:
I have not seen any credible plans as to how the Greek economy would be run in a post-default, post-Euro regime. And doubt that the current incumbents would be best placed to run the economy in such a circumstance.

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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 counterfactual of no agreement is likely to lead to even worse output in the short run with default and possible Euro exit. In the long run structural reforms are necessary and the debt levels are clearly too high both of which will bear down on output whatever happens.

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:
Very confident
Comment:
Even if something is feasible it may not be the best thing to do. We have a number of alternatives to negative interest rates per se: asset purchases, signalling about the stance of policy with forward guidance and even managed depreciation of the exchange rate. To some extent the zero lower bound as a return to cash will always offer an alternative to negative returns on electronic money. So I am not sure we necessarily need to move to a regime that encompassed negative interest rates but would certainly encourage any work that spelled out the options.

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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:
Confident
Comment:
Commercial banks' reserve accounts at the Bank of England are essentially deposits by banks in a sterling current account. Currently, under the quantitative easing regime all of the £300 bn-odd reserves are remunerated at Bank Rate. At present the quantity of these deposits mostly reflects supply-related injections resulting from asset purchases. Prior to the start of QE, the quantity of reserves tended to reflect the demand for reserves and, following appropriate reform, may actually respond in a stabilising manner to negative interest rates. The ECB currently pays a negative interest rate (currently -0.1%) on its deposits and the Bank of England could consider how to introduce negative interest rates on these sterling deposits rather than returning to a form of quantity control.

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:
If either of the main two parties form the government, then I would expect sound money policies to continue. But if the extremes end up having some undue influence or create a long period of uncertainty with the need for another election, then the hiatus may have the propensity to stall aspects of the recovery.

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