Angus Armstrong's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Director of Macroeconomic Research
Visiting Professor, Imperial College London

Voting history

The future role of (un)conventional unconventional monetary policy

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Question 2:  Do you agree that central banks should operationalise the use of these alternative tools of unconventional monetary policy for use either in the near term, or in the future, as economic conditions warrant?

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Answer:
Strongly agree
Confidence level:
Confident
Comment:
From a risk management perspective it would be prudent to operationalise alternative tools at least for the near term. In fact, one could regard it as negligent if alternative tools were not operationalised given the extraordinary economic conditions and failures in forecasting. I would expect the pros and cons of variations of 'helicopter drops' to at least be being considered behind closed doors. Of course, to be consistent with my first answer it must be clear that this is only when extreme conditions warrant.

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Question 1: Do you agree that central banks should continue to use the unconventional tools of monetary policy deployed in response to the global financial crisis as part of monetary policy under normal economic conditions?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Conventional monetary policy decisions benefit from being protected from political influence. Unconventional monetary policy is inextricably linked to fiscal policy through fiscal projections conditioned on interest rate expectations (derived from the yield curve which QE can influence) and fiscal transfers from interest earned above the APF loan rate. While there are parallels with conventional policy, the amounts involved are a different order of magnitude. In ordinary economic conditions the economy is fairly sensitive to short term rates due to the dependence on bank finance.

Brexit and financial market volatility

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Question 1: The value of the pound fell sharply this week. Do you agree that the public debate on Brexit can be expected to (continue to) lead to a substantially higher level of exchange rate volatility in the upcoming months?

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
The referendum creates a binary event on a particular day where at least one of the outcomes is uncertain. If the polls are close then the range of outcomes on the day is much higher than it would have been than without the referendum. This is present in the substantial difference in options volatility before and after the event.

China’s growth slowdown: likely persistence and effects

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Question 2:

Do you agree that if the Chinese slowdown turns out to be persistent, it will have a significant impact on UK growth (say, in the order of a few tenths of a percentage point) and/or it will justify a material change in monetary policy (for example, in terms of the timing and speed of a return to ‘normal’ interest rates) and fiscal policy (for example, in terms of the timing and speed of fiscal contraction).

Answer:
Neither agree nor disagree
Confidence level:
Not confident
Comment:
It depends what is already discounted in global markets for future world growth. Current bond yields suggest a benign growth and inflation outlook ahead.

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Question 1:

Do you agree that the Chinese economy is likely (say more than 50% probability) to maintain in the medium term (say, for at least ten years) a rate of annual growth exceeding 6%.

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Answer:
Disagree
Confidence level:
Confident
Comment:
Based on our global economy forecast using the National Institute Global Econometric Model (NiGEM) we estimate that China will grow by 5.9% between 2018-20 and slightly slower thereafter. Over the next ten years the slowdown in population growth and increasing in aging profile will be greater than in Europe. Our production function also suggests a gradual slowdown in TFP. The dynamics of the dependency rate and population look similar to East Asia (ex China) in the 1980s. The short term will depend on how sucessfully China can transition to its new development model as it liberalises its financial structure. This has rarely been a smooth process.

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