Panicos Demetriades's picture
Affiliation: 
University of Leicester
Credentials: 
Professor of financial economics
Former Governor, Central Bank of Cyprus and ECB Governing Council member

Voting history

Labour Markets and Monetary Policy

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Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
This is not the time to be raising interest rates, the BoE should wait to see how Brexit negotiations unfold. Let’s not forget any inflationary pressures to date have been due to the falling value of the pound because of Brexit uncertainty. If we have a positive outcome, inflationary pressures will recede further.

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Question 1: Do you agree that a strong labour market is a good indicator of building inflationary pressure?

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Answer:
Disagree
Confidence level:
Very confident
Comment:
The Phillips curve has indeed weakened for the valid reasons you have provided above. The most important ones are the increased labour mobility and decreased union power, These reasons aren’t transient, they are here to stay.

House Prices and the UK economy

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Question 2: Do you agree that a more widespread weakening of the UK housing market will slow UK GDP growth significantly?

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Make sure to save each question separately

Answer:
Disagree
Confidence level:
Confident
Comment:
London prices reflect its importance as a financial centre. That has to some extent distorted everything else. With London property prices becoming normalised, younger workers will find it more affordable to move back in and that will certainly have positive effects on productivity in other sectors.

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Question 1: Do you agree that the phenomenon of declining house prices will ripple out from the London property market leading more UK regions to experience falling prices?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Brexit will affect house prices unevenly. London will certainly be most affected as financial institutions and European institutions such as the European Banking authority start relocating elsewhere. This can be mitigated by people from commuting towns starting to find London more affordable and moving back in, which may lead to a ripple effect of falling house prices around London. With all the uncertainty around Brexit it’s hard to tell how the rest of the UK regions will be affected by Brexit. Those that are dependent on FDI related to EU membership and European investment will certainly experience a negative impact. The rest of the UK will experience declines in line with declining employment and GDP, but all this is highly uncertain and depends on the kind of Brexit deal that is agreed.

Global risks from rising debt and asset prices

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Question 2: Is the loose monetary policy of major central banks responsible for the recent increase in global leverage or asset values?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Large scale asset purchase programmes by central banks worked precisely because they artificially lowered long term interest rates, by pushing up the prices of assets purchased by CBS. The idea was economic growth will sooner or later acquire momentum in which case the higher asset price could be sustained without central bank support. But has it? At best, in my view growth remains anaemic. Thus, if CBs start unwinding QE too quickly, asset prices will start declining. I do, however, think that this is an unlikely scenario, QE will continue for as long as necessary to prevent this.

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