Michael Wickens's picture
Affiliation: 
Cardiff Business School & University of York
Credentials: 
Professor of economics

Voting history

Brexit and financial market volatility

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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:
Extremely confident

Market Turbulence and Growth Prospects

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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?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
Being a net oil importer and not being greatly dependent on exports to emerging markets, the UK is in a relatively favourable position. The main downside has been the effect of China's slowdown on iron and steeel prices which have made UK production less competitive. Though even this will benefit the UK consumer in the longer term. The fall in stockmarkets reflects a composition effect arising from the contributions to the index of oil and steel stocks, together with the effects of greater uncertainty. The latter will pass soon.

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

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
This much is obvious. The next issue is how these developments will affect individual economies. The more dependent an economy is on exporting to China - such as Germany - and the more an economy depends on primary product exports - such oil or ores - the greater the impact.

Autumn Statement & Charter for Budgetary Responsibility

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

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Answer:
Agree
Confidence level:
Extremely confident
Comment:
It is helpful, but it is not the best fiscal stance. Nor can it pre-commit subsequent governments to follow it. The correct policy is to tax finance permanent expenditures and to debt finance government capital expenditures and, in recession, the automatic stabilisers. This will entail running surpluses in good times in order prevent debt from increasing over time. The Charter seeks surpluses in normal times but this is not strictly necessary. In bad times - which could be frequent - surpluses are not appropriate. Like the Treasury under Gordon Brown, it still doesn't seem to understand what best fiscal practice is.

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Question 1: The Chancellor forecasts a cyclically adjusted fiscal surplus by 2017-18 and in cash terms by 2019-20. Do you agree that this planned path of fiscal consolidation is appropriate?

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Answer:
Agree
Confidence level:
Very confident
Comment:
It is desirable. Given the openness of the UK economy, whether it is attainable depends on what happens in the rest of the world which is out of the government's control. In particular, it depends on the speed of the eurozone's recovery, on the consequences of China's policy switch to a more consumer-oriented economy and on world commodity prices. Provided UK governments run the economy sensibly, much of the UK's economic cycle is due to these external factors. This is not, of course, what government's admit to when the economy is doing well.

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