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

Brexit: the potential of a financial catastrophe and long-term consequences for the UK financial sector

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Question 1: Do you agree that there would be substantial negative long-term consequences for the UK financial sector if the UK were to leave the EU?

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Answer:
Agree
Confidence level:
Very confident
Comment:
A vote to leave the EU will be followed by an extended period of uncertainty, which will is likely to put a hold all long term decisions. We do not know how that uncertainty will be resolved but it is likely that the EU will not want to create a precedent whereby a country that exists gets a favourable deal. Thus, the new equilibrium, which would be 2-3 years down the road, is likely to be worse than the current status quo in both trade and financial services. While London is unlikely to lose its status as a major international financial centre, it will nevertheless likely to lose business to Frankfurt and Paris and possibly other places in the EU. For example, the European Banking authority, which is currently located in London, it is unlikely to remain there if Britain votes to leave the EU.

The future role of (un)conventional unconventional monetary policy

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Question 2:  Do you agree that central banks should operationalise the use of these alternative tools of unconventional monetary policy for use either in the near term, or in the future, as economic conditions warrant?

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Answer:
Agree
Confidence level:
Extremely confident
Comment:
Having a range of tools thatbarebready to be used if and when the need arises makes very good sense for any central bank. It convinced markets that the central bank is always ready to act and increases the confidence that markets have to the ability of monetary policy to achieve its objectives, even when conventional policy has reached its limits. It can make forward guidance more credible.

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Question 1: Do you agree that central banks should continue to use the unconventional tools of monetary policy deployed in response to the global financial crisis as part of monetary policy under normal economic conditions?

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Answer:
Disagree
Confidence level:
Extremely confident
Comment:
Unconventional monetary policies are intended to be used when conventional,policy has reached its limits, when interest rates have reached the zero lower bound and negative interest rates cannot be relied upon. They have too many side effects, some of which are not well understood, to become part of conventional monetary policy. For example, they tend to transfer wealth to asset holders, by raising the value of financial assets, and transfer risk from the private sector to the public sector, which can create added moral hazard. They also increase the size of central bank balance sheets and when they unraveled can create losses which may need to be covered by the taxpayer. If such a situation arises and the central bank needs to be recapitalised by its respective government, central bank independence is likely to be threatened and possibly jeopardised. Moreover, the more they are used, the greater the risks as their scope may need to be extended to cover riskier and riskier assets.

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
A muted effect on wages and prices cannot be ruled out, although any such effect will be tempered by possible gains in labour productivity in low wage sectors.

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Strongly disagree
Confidence level:
Very confident
Comment:
If there are any effects on employment, they are likely to be small and will only affect low wage sectors. Paying a decent wage to those employed in these sectors is more likely to increase productivity, which may well lower employment costs, than to reduce employment.

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