Morten Ravn's picture
Affiliation: 
University College London
Credentials: 
Professor of economics
Head of Department

Voting history

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:
Confident
Comment:
This will of course depend crucially on the extent to the different parties will pursue different policies which is still unclear. But, it looks likely that Labour will raise taxes more than the Tories and that the Tories will allow for larger cuts in spending than Labour. There is ample empirical evidence that shows that such differences in policies matter for the economy. Of course, if the outcome is yet another coalition government involving LibDem, the outcome will be less sensitive to the relative performance of Labour and the Conservatives.

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:
Neither agree nor disagree
Confidence level:
Very confident
Comment:
I am not sure that the question is precise enough: I think the austerity policies may have triggered negative short run effects on activity but that the positive medium to long term effects are starting to show up now. A standard tax smoothing argument would suggest that the optimal response to a temporary shock to government spending - such as what followed the financial crisis - should be accompanied by a budget deficit. The coalition government chose to adjust government finances rather quickly. I think this might have had negative consequences in the shorter run but that the positive effects (relative to allowing for a larger increase in government debt and a later stabilization) are now setting in. It would have been useful perhaps to have considered a larger palette of policies (including money finance implemented for example through an adjustment of the inflation target) and a closer analysis of the extent to which the financial crisis may have implied semi-permanent effects on the UK economy. However, to return to the question: The austerity policies probably have had negative effects in the short run but positive effects over longer horizons.

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:
Very confident
Comment:
This is a hard one. No doubt, there will be some speculative trades going on in between the decision being made and it being made public. It is not clear to me that the new arrangement is actually more transparent than the old one. On the other hand, writing minutes is time - and effort - consuming so it would seem hard to have simultaneous releases of all the relevant information without making the process longer. But, if the 7 day period could be shortened, I personally think it would imply a more effective communication strategy.
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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:
Strongly Agree
Confidence level:
Very confident
Comment:
The simultaneous release of the Inflation Report, the minutes and the MPC decision is a good move. It enables market participants to gain a good understanding of the background for the current decision and for what is to come down the road. Compare it with a situation where the release of information does not occur simultaneously and where new information arrives in the intermittent period - such a schedule would question why policy should not react to the new information. So, as such, this is a good move.

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:
Very confident
Comment:
I think this question can only be answered by being more specific and by conditioning on events. If Greece says "renegotiation or we leave the Euro", refusal may indeed produce further uncertainties in the Eurozone in particular in the event that Greece manages to use the exchange rate to stabilize the economy. I see this as unlikely though - at least for the foreseeable future - as a euro exit would probably generate a Greek banking crisis. In this case, a Greek exit may discipline other Eurozone countries. On the other hand, if an adjustment of the Greek agreement can prevent the Greek crisis from escalating, then refusal to reconsider it would carry risks. So I think one needs to look at the particulars of the discussion as it progresses to make a firm evaluation of risks.

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