Wouter Den Haan's picture
Affiliation: 
London School of Economics
Credentials: 
Professor of economics

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:
Agree
Confidence level:
Not confident
Comment:
Default is obviously a big step with negative consequences. However, the current Troika policies will push Greece into default anyway, so it could very well be better to get it over with.

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Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

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Answer:
Strongly Agree
Confidence level:
Very confident
Comment:
It simply does not make sense for a country to pursue such a exceptionally strong counter-cyclical fiscal policy even if that country is in need of structural reform.

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:
Disagree
Confidence level:
Confident
Comment:
I would think that in most deep recessions in which one might consider negative policy rates, consumers and firms would care more about job security (consumers) and demand for their products (firms) than the cost of financing durable purchases and investment. This may be different if policy rates are substantially negative (say 5%), but such extreme values are likely to have other undesirable side affects.

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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:
Disagree
Confidence level:
Confident
Comment:
It might be possible to implement such a system, but I doubt very much it can be implemented safely. Fiat money is build on trust. I would think that this trust would be severely negatively affected if negative policy interest rates could imply negative nominal interest rates on deposits. If the adopted monetary system would be such that nominal interest rates on money balances always remain non-negative then the stability of the financial sector would be at risk. Note that the MPC of the BoE has chosen not to lower Bank rate below 50 basis points, exactly because they thought that doing so would make banks' profit margins too low.

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:
Agree
Confidence level:
Confident
Comment:
I typically would disagree with such a question, since the differences between proposed policies become substantially smaller when you take into consideration the difficulties in implementing them. This time could be different. The possibility of a referendum on UK membership of the European Union could be the kind of thing that does have far reaching consequences and it may, thus, this election may turn out to be quite important.

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