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

Voting history

ECB's quantitative easing

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Question 1:

Do you agree that the design of the ECB's QE programme reduces its effectiveness? 

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Answer:
Disagree
Confidence level:
Not confident
Comment:
QE involves taking government bonds out of the economy in exchange of liquidity. How risk regarding future price changes (and possible future defaults) is shared between countries has no effect on this operation itself and no direct effect on how these two changes make their way through the system. How Eurozone countries share risk (in general) is of course very important for economic developments in the Eurozone. However, the announced limited risk sharing for this round of QE is in line with previous policy actions and cannot have provided new information about the extent to which Eurozone countries are willing to share risk. So how does this matter for the ECB's effectiveness? Unfortunately, we really do not know how additional liquidity in the financial sector and a reduced stock of government bonds in the private sector affects real activity. Unless one thinks that this particular risk sharing arrangement has changed people's opinion on how risk in the Eurozone will be shared in general, it is hard to see how it affects the effect of this round of QE.

Deal or no deal: The Greece standoff

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Question 3: Do you agree that implementation of the agreement will lead to an expected decrease in Greek debt repayments?

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Answer:
Agree
Confidence level:
Confident
Comment:
Default typically does not mean that the creditors will get nothing back. How much the creditors get back will depend mainly on the strength of the Greek economy. It is difficult to know what will happen if no agreement will be reached, but agreements that will hurt the Greek economy will negatively effect the amount of money the creditors can expect. In fact, it could very well be the case that the creditors end up doing better if Greece does a partial default now and stops pursuing bad economic policies. Even better for the creditors would be if there would be an agreement where debt forgiveness is coupled with long-term structural reform.

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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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