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

Voting history

ECB Monetary Policy and Catch-up Inflation

Question 2: Which of the following policies is the most desirable to meet the ECBs objective to achieve its mandate of “price stability” as you understand this term.

Answer:
Inflation targeting
Confidence level:
Very confident
Comment:
A clear point target of 2% or perhaps 2.5% seems pretty much consistent with price stability. We can adopt a margin of error or range and ask the ECB's President to explain deviations of more than 1% on either side and outline the reason for the miss and when we will return back to target range. Essentially the BoE model would work well here. The question then is to whom would such a report be written and how often e.g. every month we were outside the range. Which implies some mechanisms for reporting to the European Parliament, Governing Council and the National Central Banks.

Question 1: To what extent do you agree with the following statement? “The European Central Bank should systematically allow for inflation to exceed its target to compensate for periods of below target inflation.”

Answer:
Disagree
Confidence level:
Confident
Comment:
Imagine after a positive temporary but persistent inflation surprise that the central bank now seeks to tighten monetary policy sufficiently to bring about a disinflation of equal magnitude to offset the temporary inflation shock. It strikes as pretty hard to run policy in order to cancel out the positive and negative differences and may be quite difficult for people to understand why we are engineering a such a disinflation, which may also run the risk of hitting the zero lower bound again and may therefore lack credibility. We seem to have in mind offsetting previous errors in policy but I am kind of happy with bygones being bygones. For planning purposes knowing the target is clearly specified at 2% or something like 2.5% is enough.

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.

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