Tony Yates's picture
Affiliation: 
University of Birmingham
Credentials: 
Professor of Economics

Voting history

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:
Confident
Comment:
All the uncertainties and news flows that I itemised above will affect not just the exchange rate, but likely the value of the FTSE, the term structure, and general levels of confidence in the economy. It's likely this process has already begun, though we can't see the transmission yet beyond asset markets themselves, and it should be noted that so far stocks have held up relatively well since the referendum date was announced.

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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:
Confident
Comment:
There are lots of uncertainties in the run up to the referendum, and these could all lead to fluctuations in the estimated probability of a Leave vote, and it is those fluctuations that are likely to generate movements in the exchange rate. The release of opinion polls, the emerging news about the number of Tory MPs backing Leave, news about the relative numbers in favour of Leave in England and the rest of the UK, and the associated consequences for a second referendum on Scottish independence, the news about the refugee crisis as the weather warms in the Mediterranean, and so on.

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:
Neither agree nor disagree
Confidence level:
Not confident
Comment:
It's too early to tell. For starters, the oil price fall, other thing equal, would be positive for the UK, as a net importer, and presuming that this also translates to falls in other wholesale energy prices like gas and electricity. Second, right now we don't know whether this is just noise, or a response to a slight reduction in growth prospects for China, or the harbinger of something much more serious.

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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:
Not confident
Comment:
I would say that they have deteriorated somewhat, but not 'seriously'. It remains to be seen whether the stock market correction goes any further, or starts to affect credit risk and therefore financial intermediation.

Deal or no deal: The Greece standoff

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Question 3: Do you agree that implementation of the agreement will lead to an expected decrease in Greek debt repayments?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
Again there is the question of what the counterfactual is. Relative to default, surely more debt will be paid back. However, I doubt much of the debt will be paid back even in the 'no default' option. A no default deal will be followed by a restructuring and write down, and the NPV of the debt, which is already low, will fall further.

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