Martin Ellison's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

The Importance of Elections for UK Economic Activity

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:
Strongly Disagree
Confidence level:
Very confident
Comment:
The idea that fiscal contractions can be expansionary has largely been discredited. The work by Alesina, Favero and Giavazzi shows that it matters whether austerity comes about through rises in taxes or cuts in expenditure, but the evidence is that spending-based consolidations are at best neutral and that taxation-based consolidations are contractionary. There is scant support for spending-based austerity having a positive effect on output, and clear indications that tax-based austerity does not.

Transparency and the Effectiveness of Monetary Policy following the Warsh Review at the Bank of England

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Question 2: Do you agree that the Bank's proposal to release the policy decision, MPC minutes and (once a quarter) the Inflation Report all at the same time justifies a change in the structure of MPC meetings from two consecutive days to a process in which in the MPC meetings are spread out over seven days?
 
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Answer:
Agree
Confidence level:
Confident
Comment:
The practicalities of collating and processing minutes is likely to be a constraint that speaks for the revised timetable. It is imperative that information released by the central bank is of good quality, otherwise monetary policy would be injecting extra ‘noise’ into the economy. There is an obvious trade-off between the timeliness and quality of information, which the Bank of England’s proposal seems to address reasonably.
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Question 1: Do you agree that the simultaneous release of the policy decision, the enhanced minutes (including the voting record) of the MPC meeting and (in the relevant months) the release of the Inflation Report will facilitate inference on the likely stance of monetary policy?
 
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Answer:
Agree
Confidence level:
Confident
Comment:
The timely release of information relating to central bank actions should improve the ability of the market to infer the stance of monetary policy, provided that markets are able to process that information efficiently. The most prominent challenge to efficiency is the ‘beauty contest’ idea, first formulated by Keynes and updated by Morris and Shin. There, the concern is that market participants discount their private information and instead become ‘fixated’ on the information provided by the central bank. Whilst this is an elegant and rational theoretical construct, I have reservations about whether this is really a regular issue for the Bank of England. Several academic papers have shown the fragility of the result in slightly different settings, e.g. in 2004 Hellwig argued in a working paper that releasing public information is unambiguously good because the benefits of reduced price dispersion dominate any costs of markets potentially becoming fixated.

Greece’s elections and the future of the Eurozone

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Question 2: Do you agree that refusal of the core EU countries to a renegotiation of the Greek bailout agreements would carry serious risks for the economic well-being of the Eurozone?

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Answer:
Agree
Confidence level:
Not confident
Comment:
The risk that Greece could become “Europe’s Lehman” has diminished as the majority of Greek debt is now held in the public sector. This has removed some of the risks associated with a Grexit. However, a hard line stance by core EU countries on renegotiation of the Greek bailout agreements could well be counterproductive. Syriza has toned down its rhetoric in recent statements, a movement that it would be wise to encourage by reciprocal responses from the core EU countries. Ultimately, it would be good to work towards mechanisms whereby countries could leave the Eurozone if economic fundamentals dictate that leaving would be in everyone’s interest.

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Question 1: Do you agree that a Syriza victory on 25 January would lead to a significant or sustained escalation in spreads for other peripheral Eurozone countries?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Recent opinion polls have consistently predicted that Syriza will have the largest share of the votes on 25 January, so a Syriza victory should already have been priced in by the market. The more interesting question is whether events subsequent to a Syriza victory may cause an escalation of spreads in other peripheral Eurozone countries. A key question is whether Syriza can form a government alone or in coalition with other parties, or whether there will need to be a second round of elections. If new elections are needed then uncertainty will rise, particularly in light of the four-year bailout plan finishing already at the end of February 2015. Recall that the Greek government’s attempts to raise funding in December 2014 were problematic.

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