Nicholas Oulton's picture
Affiliation: 
London School of Economics
Credentials: 
Senior Visiting Research Fellow

Voting history

National Living Wage and the UK economy

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
The NMW will be 34% higher in 2020 than is the current minimum wage. Assuming the Bank of England hits its 2% inflation target over 2015 to 2020, that is an increase of 22% in real terms. But if the productivity of minimum wage workers rises at 2% and the Bank hits its target, then the NMW need have no effect on employment. Most observers are pessimistic about productivity but I remain relatively optimistic. Howeverit is possible that while average productivity ries at 2% that of low wage workers will rise more slowly.

Brexit and financial market volatility

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Question 2: Do you agree that the possibility of Brexit significantly increases uncertainty and volatility in financial markets and the economy in general?

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Answer:
Agree
Confidence level:
Not confident
Comment:
The crucial issue is what sort of policy Britain would follow in the event of Brexit. Brexit would be a huge shock to the British political system. So future policy would be hard to predict. Who would be in charge? On the other hand other risks might make uncertainty about British policy seem small beer. The election of Marine Le Pen to the French presidency would likely lead to the breakup of the eurozone and even of the EU. This outcome may not seem the most probable one at the moment but any rational decision-maker should take it into account.

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Question 1: The value of the pound fell sharply this week. Do you agree that the public debate on Brexit can be expected to (continue to) lead to a substantially higher level of exchange rate volatility in the upcoming months?

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Answer:
Agree
Confidence level:
Very confident
Comment:
If the opinion polls give conflicting and changing results as to the likely winner of the referendum campaign, then I would expect exchange rate volatility to be high. This seems quite likely. If on the other hand a clear winner emerges in the polls early on (whether leave or remain), then volatilty will be low. However the level of the exchange rate (up or down) will reflect the expected result.

Market Turbulence and Growth Prospects

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Question 2: Do you agree that the falls in share prices, low oil prices and the slowdown in some emerging market economies will have a significant negative impact on the UK’s economic recovery?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Low oil prices are a positive for the UK economy. Though they are bad for Scotland they make secession less likely, thus reducing political risk for the UK as a whole. The slowdown in emerging markets including China is obviously a negative for the UK but I would not expect it to be a major one quantitatively. The UK stock market is more of a worry since it may be a good indicator of confidence and the willingness to invest. But the FTSE 100 has been declining steadily since April last year (partly due no doubt to expectations of a rise in US interest rates), so there is no sudden change here.

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Question 1: Do you agree that economic growth prospects for the global economy have seriously deteriorated?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Prospects have deteriorated seriously for oil-producing states but not for for the global economy . The fall in the oil price is largely due to a rise in supply relative to demand. So for oil-importing states it is a benefit. The recent fall in the Chinese stock market looks more like a correction of a bubble than a reappraisal of fundamentals. It is not very relevant for the rest of the world. The extent of the slowdown in Chinese growth (pretty small on official figures) is what really matters but it is unlikely that the fall in the Chinese stock market is an accurate measure of this.

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