Patrick Minford's picture
Affiliation: 
Cardiff Business School
Credentials: 
Professor of economics

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 Disagree
Confidence level:
Extremely confident
Comment:
The UK economy is no longer in 'crisis' mode, justifying emergency low interest rates close to the zero bound, and also bank reserves, from QE operations, of around 25% of GDP. This situation creates large distortions in savings markets: on the one hand absurd incentives to lend on car loans and mortgages, while on the other denying credit to small businesses (which are risk-penalised). Ideally raising rates and reducing QE would be accompanied by an easing of bank regulation and 'macro-prudential controls'.

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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:
Agree
Confidence level:
Confident
Comment:
The Phillips Curve error term is sensitive to the factors listed above: immigration, global competition and so on. Plainly these have been dampening the response to unemployment; however there is no reason to believe this response has gone away.

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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Answer:
Strongly disagree
Confidence level:
Confident
Comment:
Yes, there is some connection between the housing market and consumption but this is because both are driven by business cycle income effects; housing spending has a high income elasticity and so is highly correlated with consumption. Currently the UK is experiencing a steady business cycle expansion whose demand direction is being shifted by the Brexit devaluation of some 15%, away from consumption towards net exports, profits and business investment.

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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:
Strongly disagree
Confidence level:
Very confident
Comment:
There are good signs of steady upward movement now outside London. London has been exceptionally strong until the recent correction. This seems to be a specific London correction, due to the stamp duty rate and also fears about a Corbyn attack on non-doms plus high taxes.

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:
Neither agree nor disagree
Confidence level:
Confident
Comment:
See my answer above. Partly responsible but as part of the overall regulatory/monetary situation. Central banks can be considered generally responsible for the financial crisis and the responses to it. They permitted/encouraged a huge credit boom in the 2000s; they then brought in regulations that precipitated difficulties in the interbank market; these were not prevented by central banks from triggering the collapse of the system from Lehman on. Subsequently they have continued to over-regulate and over-buy bonds. The mess is in general due to poor central bank behaviour from 2000 onwards.

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