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

Voting history

ECB's quantitative easing

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Question 2:

Do you agree that the structure of the ECB's QE programme makes the Eurozone more fragile and increases the risk of one country leaving the euro?

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Answer:
Strongly Agree
Confidence level:
Very confident
Comment:
In a monetary union it should not matter where the losses arise (e.g. which regional Fed or national central bank) as both can be easily re-capitalised by the same government. But where there is no central government, as in the case of the Eurozome, the solvency of the regional or national governments becomes important. The design of the QE programme, and comments from ECB board members, seem to reflect this recognition. The next shock to the Eurozone is likely to see this issues resurface.

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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:
Strongly Agree
Confidence level:
Very confident
Comment:
What is the measure of effectiveness? Surely the objective goes beyond increasing base money; that is simply the operational outcome. If the objective is to increase broad money or nominal GDP - I would argue the objective of QE - then the limited risk sharing will reduce the effectiveness of QE when there is real concern about the solvency of a government. The limited risk sharing increases the probability of the central bank becoming insolvent compared to with risk sharing. And since the government would not be able to re-capitalise it, this carries the risk of capital flight. This would reduce the probability of the objective being achieved. As we know from the recent Greek negotiations, it is far from clear that other EU members are prepared to support an insolvent government. Indeed, one could argue that the greater the QE programme, the more this increases the risk for the central bank if the government is insolvent (or cannot access private markets).

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:
Strongly Disagree
Confidence level:
Very confident
Comment:
Sadly I do not think that the current deal (such that we know) will be anything like enough to stabilise Greece's finances unless the economy can grow which seems highly unlikely with the likely NPLs in the banking system. I think the end game will be a referendum or fresh election which will decide the fate of Greece in the eurozone.

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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:
Strongly Disagree
Confidence level:
Confident
Comment:
At a minimum I would have thought one would want capital controls in place first before defaulting. Since there is some way to go before the debt relief is known (if there is any), with capital controls in place I don't see why one would not hear the offer first.

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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.

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