Michael McMahon's picture
Affiliation: 
University of Warwick
Credentials: 
Associate Professor of Economics

Voting history

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:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Clearly some alternate timetable is necessary if minutes of the deliberation will be prepared (and given the care that tends to be taken with official central bank communication). Whether it needs to be as long as 7 days, I am not sure but it cannot be the same 24 hour process (Wednesday afternoon to Thursday at noon) as it has been since 1997. I am more concerned that the decision will be made on a Wednesday but not announced until Thursday. The overnight delay raises the risks of leaks. It is worth remembering that some of the push for greater transparency is the result of an earlier period during leaks were more widespread; for example, the push for greater Fed transparency of the Fed in 1993 followed a period of leaked interest rate decisions which caused political anger at the Fed's opaqueness.
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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:
I think there is still a lot to understand about how Central Bank communication affects markets and what markets garner from the Central Bank. That said, when a surprising decision is announced, markets will want to learn whether the surprise was (broadly) driven by new views on the state of the economy (which would come out with the Inflation Report or the minutes) or whether it was some change in the committee reaction function (which might come out in the voting record). Providing all the information at once will allow the market participants to have common information about the content of the various information sets without having to endure a few weeks of possible misinformation and speculation.

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:
Neither agree nor disagree
Confidence level:
Confident
Comment:
I think the refusal to renegotiate the bailout programme would increase the chances that the Greek seek some form of exit from the Eurozone; even if they never go through with it, the threat will be disruptive. But equally agreeing to renegotiate may encourage other countries to take more hard line positions with Brussels on the area. This could also be damaging to already difficult European policymaker.

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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:
Agree
Confidence level:
Confident
Comment:
It depends on the extent of the majority they obtain, but if they get a good election win I think it will have an effect on other countries spreads. I do not think it would affect peripheral countries equally, but rather would be focused in those peripheral countries where there is growing popularity of anti-Troika/anti-austerity parties. It would also likely mean that markets would react more adversely in these countries to any future political about the popularity of these parties.

2014 Autumn Statement

Question 1: Do you agree that the scale of this planned reduction in total managed expenditure is credible?

Answer:
Disagree
Confidence level:
Confident
Comment:
I don't believe that the scale of the spending reductions is possible. I think it the actual executed plan is much more likely to require (a) an even slower transition to surplus, and/or (b) tax changes either from a recovery of income tax rates (see next question) or higher taxes from other tax instruments.

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