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

Voting history

Euro weakness in 2022

Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?

Answer:
No
Confidence level:
Very confident
Comment:
The ECB, as any other inflation-targeting central bank, cannot target the exchange rate as well as inflation. It must think about bringing domestically generated inflation back to a level consistent with price stability with a consistent interest rate strategy.

Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?

Answer:
Monetary policy differences
Confidence level:
Confident
Comment:
The ECB has picked a different point on the trade-off between output and inflation stabilisation than the Fed. Maybe it had to for structural reasons. A less aggressive reponse to emergent inflationary pressures and concerns about weak growth in the face of high levels of indebtedness may have acted to constrain the policy response. And hence to the exchange rate depreciation.

Assisting Households Facing Rising Energy Costs

Question 3: Should a windfall tax be used to (fully or partially) finance support to households?

Answer:
No opinion or other
Confidence level:
Very confident
Comment:
Like do many industries, we desperately need business investment. It is no different for energy companies, at a time when the supply chain and inventories need building up and we are concerned about energy security. So we should not think of a windfall tax as something the state can just have back. We need to design tax and investment credits to push foward the investment agenda. One could imagine the tax being used as an incentive to invest, if credit were given against specific investments.

Question 2: Which of the following is the best way to address the impact of rising energy costs on household finances?

Answer:
Price caps based on energy use
Confidence level:
Very confident
Comment:
Energy usage is highly correlated with income. So increasing costs with usage is not only progressive but also encourages economies of usage and would pay for itself i.e. with increasing public debt. We do though also need some direct support for the poorest households with large families and/or those in poorly insulated housing. Again Universal Credit can help here. As would the old Child Benefit.

Question 1: Overall, which of the following best characterises how the government’s proposed energy policies will leave the average UK household over the medium term:

Answer:
No better nor worse
Confidence level:
Confident
Comment:
The costs of the cap will increase public debt so over the medium or long term, households may have lower energy costs today but higher public debt in the future. There are some benefits from an element of progressiveness but direct financial support and an extension of Universal Credit would have been better targetted. That inventories and other measures to stabilise supply are absent is a failure. It is also important that there are price incentives to economise of the usage of a scare-pollluting energy source.

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