Nicholas Oulton's picture
Affiliation: 
London School of Economics
Credentials: 
Senior Visiting Research Fellow

Voting history

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

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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

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:
Disagree
Confidence level:
Confident
Comment:
No. The outcome would be better for Greece and the Eurozone. If the rest of the Eurozone forces Greece into exiting the euro this would likely be a much better outcome for Greece than continuing with current policies. Any attempt by the Eurozone (i.e. Germany) to punish Greece for such a choice (e.g. by forcing Greece out of the EU) should be strongly resisted by the UK. There would certainly be contagion from Greece but this would also be a good thing since either it would force debt restructuring and debt guarantees (Eurobonds) or it would lead to other countries exiting too. It is generally agreed that Greece can’t pay. A Syriza government will be committed to a “won’t pay” position which after all only acknowledges reality. So the rest of the Eurozone would be well-advised to seek a reasonable settlement with the Greeks which would have many precedents in sovereign debt crises. If to the contrary the rest of the Eurozone seeks to hold Greece to existing accords then the logic of the Syriza position is Grexit followed by default (“debt restructuring”). This would be a much better outcome for Greece than continuing with current policies which threaten a generation of slump and unemployment. It is time to acknowledge that the euro has been a disastrous economic experiment. So it needs to be either drastically reformed or abolished. It is well known that its founders wanted to push ahead with monetary union as a lever to bring about political union. But the latter has not happened, at least in the form which is currently needed, debt forgiveness and guarantees. So the Eurozone has a choice, either move towards debt forgiveness and Eurobonds or break up. Failure to make this choice will lead to political parties fundamentally hostile to the market economy attaining power.

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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:
Strongly Agree
Confidence level:
Extremely confident
Comment:
The markets are already anticipating a Syriza victory so this has to be bad news for other highly-indebted Eurozone countries. The only counter to this would be massive QE by the ECB focused on Spanish, Portuguese and Italian government debt. But nobody seems to think this is likely because of German and other objections. It is not that governments currently in place in Spain, Portugal and Italy are going to seek debt forgiveness but rather that they will be replaced by other political movements (e.g. Podemos in Spain) who would be so inclined. Or at least that is a risk which markets will take into account.

2014 Autumn Statement

 

Question 2: Do you agree that the underperformance of tax receipts in recent years, provides a strong case for higher taxes?

Answer:
Disagree
Confidence level:
Confident
Comment:
Since I believe (subject to the caveats in my answer to the first question) that the UK will grow more rapidly than the OBR currently forecasts I expect tax receipts to revive. So I see no case for higher taxes now. Of course those (unlike me) who want a bigger state should definitely be in favour of higher taxes.

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

Answer:
Agree
Confidence level:
Not confident
Comment:
I think that the planned reduction can be achieved but I am not confident that it will be. This is mainly because of political risks. Who knows who will be Chancellor in 2019-20? Also our recovery could be derailed by another disaster in the eurozone which would dictate a relaxation in fiscal policy. On the positive side, the reduction can be achieved by growing the denominator, GDP, as well as by reducing the numerator, spending. I am more confident than the OBR that productivity growth will revive. In my view the OBR gives too much weight to the disappointing experience since 2007 and not enough to the good performance before then. The OBR has output per hour growing at only 2% even in 2019-20 which means that the level of output per hour will still be about 14% below its pre-crisis trend. Though the crisis will have caused permanent losses I think their figures are too pessimistic. So I expect faster productivity growth to reduce the spending/GDP ratio. .

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