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

Deal or no deal: The Greece standoff

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Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

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Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
A disorderly default will trigger a chain reaction of negative shocks that could prove truly catastrophic. If the ECB ceases to supply ELA to Greek banks, which would be almost inevitable in the event of default, the banking system will close down. Capital controls are not the answer, if there's no liquidity whatsoever. Shutting get down the banking system is like shutting down the entire economy. Cash will be king, those who have it will get by, those who don't would have no access to basic necessities, bread, milk, medicines, electricity. If this lasts for a few days, there will be blackouts and riots on the streets. What will happen next is highly uncertain, if there's still no agreement. This is clearly chartered territory. It may be necessary to issue IOUs to pay salaries and wages, that will start being traded allowing some domestic exchange. If there's still no agreement, Greece will be forced to introduce a new currency and may be forced out of the EU.

Monetary policy and the zero lower bound (ZLB)

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Question 2: Do you agree that the benefits of reforming the monetary system to allow materially negative policy interest rates outweigh the possible costs?

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Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
See my previous comment.

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Question 1: Do you agree that it is feasible for the UK authorities to change the monetary system so that materially negative policy interest rates could be safely implemented? (In answering, you may wish to explain your reasons and define your view of 'material')

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Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
Any proposal to tax holdings of cash is, at best, impractical. Even if it can be implemented, which is very doubtful, it would lead to confusion, inefficiency and currency substitution. It would undermine the foundations upon which modern exchange economies function, namely the existence of a stable and simple to use medium of exchange.

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:
No opinion
Confidence level:
Very confident

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:
We really don't have a counter-factual, we don't know what GDP and employment would have been had we had less or no austerity. Austerity reduces aggregate demand by more than it's usually assumed, as the value of the fiscal multipliers is larger than has typically been predicted, as has also been recently recognised by the IMF. This could mean that the reduction in GDP it causes is larger than the reduction in the public debt, making debt sustainability more of an issue. Also, excessive austerity can impair long run growth, by eroding the quality of a country's physical infrastructure and human capital. These are long run effects but there's plenty of research, including some of my own published in the Economic Journal in 2000, which shows that the returns to public capital are quite high, once the indict effects on the productivity of private capital are taken into account.

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