Jumana Saleheen's picture
Affiliation: 
Vanguard Asset Management
Credentials: 
Chief Economist

Voting history

Causes for Weak Long-Run UK Growth

Question 1: Which of the following will be the most important constraint on UK potential output in 2023, relative to its pre-2019 trend?

Answer:
Oil prices and Ukraine war
Confidence level:
Very confident
Comment:
In the short run, boosting potential output is hard. But if the war in Ukraine were to end, and oil and natural gas prices fell, this would be a positive supply side shock for the UK economy.

Question 2: Which of the following policies would do the most to boost UK GDP in the medium term (over the next decade)?

Answer:
Public investments and R&D subsidies
Confidence level:
Very confident
Comment:
In theory boosting labour productivity is the single most important way to boost GDP in the medium run. To boost labour productivity we do need to see bold policies and investment (both public and private sector). Investment should cover investment in workers, capital and R&D. Bold policies should be designed to improve labour mobility across the county.

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:
Extremely confident
Comment:
No because of the impossible trilemma. The impossible trilemma refers to the idea that an economy cannot pursue independent monetary policy, maintain a fixed exchange rate, and allow the free flow of capital across its borders at the same time. The ECB should not respond as it supports a floating exchange rate currency regime. If it were to intervene the ECB would have to give up its pursuit of independent monetary policy. Or it would have to intervene in capital markets, thereby stopping the free flow of capital across its borders. None of these options are desirable.

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

Answer:
Real factors
Confidence level:
Confident
Comment:
The main reason for the fall in the euro was expectations that the US would grow much faster than the euro area, given the war in Ukraine. Euro area: large negative terms of trade shock from the war in Ukraine. It intensified in September, when Russian gas flows through the Nord Stream 1 pipeline ended. Fears grew that lack of gas would bring European industry to its knees and the block would suffer recession. USA: as a net exporter of oil and gas, the US experienced a positive terms of trade shock – that not many people talk about. But it is important. It has made the US richer. The US also experienced a strong post-Covid recovery supported by strong household balance sheets built up from pandemic stimulus payments, and a historically tight labour market.  High and rising inflation in both regions led interest rates to rise in both regions through 2022. But the Fed started earlier and hiked aggressively. Monetary policy differentials did also contribute to dollar attractiveness.

Addressing UK public finances after the mini-budget crisis

Question 2: Relative to the Autumn statement, would the UK be better off reducing public debt

Answer:
Neither faster nor slower
Confidence level:
Confident
Comment:
I thought they got the balance right. History shows that economic growth is the key to sustainable public finances.

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