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

Voting history

Monetary policy and the zero lower bound (ZLB)

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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.

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:
Not confident at all
Comment:
I think that the macroeconomics profession doesn't have the evidence to answer this question. Personally, I would have chosen for less austerity and in particular would have taken advantage of low interest rates to invest more in health, education, infrastructure, and the environment. But it is not completely implausible that the austerity policies of the coalition government prevented confidence from deteriorating further and by doing so had a positive effect on investment and employment.

Transparency and the Effectiveness of Monetary Policy following the Warsh Review at the Bank of England

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Question 2: Do you agree that the Bank's proposal to release the policy decision, MPC minutes and (once a quarter) the Inflation Report all at the same time justifies a change in the structure of MPC meetings from two consecutive days to a process in which in the MPC meetings are spread out over seven days?
 
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Answer:
Agree
Confidence level:
Confident
Comment:
It is possible that spreading out the meetings will make the process less focused and may make it more difficult to respond to the very latest developments. however, the chance that something completely new and relevant happens during the week of the MPC process is simply not that big.
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Question 1: Do you agree that the simultaneous release of the policy decision, the enhanced minutes (including the voting record) of the MPC meeting and (in the relevant months) the release of the Inflation Report will facilitate inference on the likely stance of monetary policy?
 
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Answer:
Agree
Confidence level:
Confident
Comment:
Under the current system, the minutes could possibly be affected by what happens AFTER the release of the policy decision. For example, if financial markets respond unfavorably, then there may be a temptation to change the minutes to save the image of the MPC. This problem, whether it is perceived or real, is no longer present under the new system. Releasing the inflation report at the same time means that the policy decision can be backed up by more solid evidence and actual numbers. To help the market digest the simultaneous release of all the relevant MPC documents, the Bank should give some guidance, especially initially, but the staff of the Bank should be capable of doing this.

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