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

Voting history

Deal or no deal: The Greece standoff

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Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
No. Neither option is particularly attractive, but default has some very large downsides, including social collapse, exit from eurozone and even EU. I would guess that if Greece survives the non default option a favourable renegotiation could be had later, particularly if Greece gave ground on structural reforms.

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Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

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Answer:
Neither agree nor disagree
Confidence level:
Not confident
Comment:
It depends what the counterfactual is. Relative to no deal, and default, this will have a positive effect on GDP for a few years at least, as I would forecast that the few years of autarky and financial collapse would be very painful. Relative to a situation where fiscal instruments were on their current settings, yet there was no default, it would have a negative effect.

Monetary policy and the zero lower bound (ZLB)

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Question 1: Do you agree that it is feasible for the UK authorities to change the monetary system so that materially negative policy interest rates could be safely implemented? (In answering, you may wish to explain your reasons and define your view of 'material')

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Answer:
Agree
Confidence level:
Confident
Comment:
I agree it's feasible. We know what to do and how to do it. I'm less confident that it can be done 'safely' as I explain in my answers to the next question.

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Question 2: Do you agree that the benefits of reforming the monetary system to allow materially negative policy interest rates outweigh the possible costs?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
Although we can explain in a formal setting what reforms would be needed, and the benefits that would accrue to removing the zero bound constraint, I am much less sure that these benefits would actually be realisable in the real world. Theoretical research and practical history shows that monetary institutions are quite delicate. Countries can dollarise quickly if their own central banks debase their currency, for example. It is now a popular meme that money is a kind of trusted illusion. Who knows how that trust would respond to such a radical set of reforms. For this reason, I'm against embarking on them except as an absolute last resort. With conventional fiscal policy still with much room, and unconventional monetary/fiscal policies like credit easing that could be flexed much further, I'd be in favour of trying those if we prove unable to escape the current situation. And as far as a preventative policy for the future goes, I would vote for an increase in the inflation target over reforms to eliminate the zero bound.

The Importance of Elections for UK Economic Activity

Question 2: Do you agree that the outcome of the general election will have non-trivial consequences for aggregate economic activity (employment and GDP)?

Answer:
Agree
Confidence level:
Not confident
Comment:
All parties have chosen to conceal the details of their plans - for fear that they give their opponents too much to attack, or us too much to disbelieve - so it is hard to know what they will do. Other uncertainties are how formal or informal Coalition deals will work out. And the fact that just as with the last govt, plans may not be stuck to.

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