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

Voting history

Deal or no deal: The Greece standoff

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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 Disagree
Confidence level:
Confident
Comment:
Without an agreement I would expect the economy to relapse into a deep recession. With the agreement, depending on what is finally offered in terms of debt relief, there is at least a hope of an improvement. Therefore I think that the package will have a marginal positive effect compared to default and banking system collapse.

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:
Strongly Disagree
Confidence level:
Confident
Comment:
I am sympathetic to the concern around the lack of 'room to manoeuvre' in the event of another serious downturn expressed in the question. However, for the first three years of this recession, even after interest rates were reduced to 0.5 per cent in early 2009, the break down in the transmission mechanism lead to higher borrowing spreads that mitigated the stimulus. Perhaps a better response is to address the banking sector and financial market weakness faster - once total collapse had been averted - and increase the diversity of finance. This is a more direct and better understood response than experimenting with negative rates. I also suspect that innovation would soon offer insurance against 'materially' negative rates and so weaken the degree of stimulus e.g. the use of money market funds with chequing facilities.

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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:
Scandinavian central banks have shown it is feasible to have marginally negative nominal official rates. However, I am doubtful that 100 basis points off the Bank rate would make such an impact on the UK in the extreme times when this would be relevant. Therefore, I interpret 'materially negative' to be around negative two per cent or so. I am doubtful this could be 'safely implemented'. For example, in the UK home owners would earn money (or cost zero) for a typical floating rate mortgage. For all sorts of political economy reasons property would be a very good store of value (as we repeatedly see by government policy toward housing). Also banks would be paid to borrow from interbank markets and so run mismatched balance sheet positions (to require interbank borrowing). This could raise all sorts of information problems which might affect market liquidity.

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:
Disagree
Confidence level:
Confident
Comment:
The Bank uses the simultaneous release and the need to safeguard the integrity of the decision making process and of the (to be enhanced) minutes to justify the changes in the meeting schedule. I can see that producing enhanced minutes takes more than one evening which would be required under the current meeting and proposed publication schedule. So I accept that a change to the timetable is required. Official (and enhanced) minutes take time, but I struggle to see how they justify going to such a long schedule. The longer the gap between deliberations and decision, the less useful the minutes are likely to be.
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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:
Disagree
Confidence level:
Confident
Comment:
I welcome with the changes for the announcement and enhanced minutes. I can also see the benefits to simultaneously releasing the Inflation Report in reducing the number of news events. But assuming that the Report cannot be finished and published overnight, then the Report may not have the full information available to the MPC when it made its decision. The announcement and enhanced minutes are likely to overshadow the Report possibly resulting in less analysis and discussion (and feedback to the Bank). So I do not believe simultaneous publication of the Inflation Report will facilitate inference.

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