Jagjit Chadha's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Professor of economics

Voting history

Monetary Policy and Inequality

Question 2: What role should inequality play in the monetary policy decisions (interest rate policy and quantitative easing)?

Answer:
No role
Confidence level:
Extremely confident
Comment:
Inequality outcomes are a question are a question first for the politician who acts as the social arbiter on whether a particular outcome is acceptable or not. And then becomes a question for the Treasury in terms of changing the tax/benefit system. The central bank is charged with price and financial stability and cannot really trade these objectives for ones of reducing inequality. It neither has the tools nor the experience to do so.

Question 1: How large is the impact of monetary policy on the joint distribution of income and wealth?

Answer:
Very Small
Confidence level:
Confident
Comment:
We tend work by the proposition in normal times that monetary policy affects long run nominal magnitudes and rather than real income or wealth, which are determined by tastes and technology. In the short run changes in monetary policy will affect aggregate demand through a variety of channels that may impact more disproportionally on those cannot hedge themselves against interest rate or employment risk. But that should not lead to a permanent change in real living standards.

Central Bank Digital Currency for the UK

Question 2: What effect will the introduction of a CBDC have on UK banks?

Answer:
Moderate benefits
Confidence level:
Not confident
Comment:
As with my previous answer, it all depends on the details of the introduction of the CBDC. Specifically, who can hold, what it can be used to buy and in what quantities. And whether cash, as we know it, will run in parallel. The ability of the private sector to provide financial intermediation must be protected.

Question 1: How beneficial would it be to the UK economy for the Bank of England to introduce a central bank digital currency in some form in the upcoming decade?

 

Answer:
Beneficial
Confidence level:
Confident
Comment:
It is not so much the adoption of a central bank digital currency per se but how it works within the structure of the financial system and what changes it forces. To the extent that it increases participation in the financial system, efficiency in transactions and reduces illegal uses of cash it will be helpful. But we need to think carefully about how to prevent it hampering the the funding or deposit base of the private banking system.

Fiscal Rules in the European Monetary Union

Question 2: Which of the following is the one reform you would choose to improve fiscal rules?

Answer:
Fiscal councils or fiscal standards
Confidence level:
Very confident
Comment:
We need to move away from the debt and deficits obsession to a much fuller account of the fiscal paths for expenditure, revenue raising and debt issuance. A fiscal council can focus discussion on the normative aspects of policy as well as encourage counterfactual analysis of alternate policy choices. It should also be able to offer critiques (positive or negative) of government and opposition policies. Ultimately the fiscal council should offer counsel.

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