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

Voting history

Monetary policy and the zero lower bound (ZLB)

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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.

Question 1: Do you agree that the austerity policies of the coalition government have had a positive effect on aggregate economic activity (employment and GDP) in the UK?

Answer:
Disagree
Confidence level:
Confident
Comment:
I agreed with the initial plan, but thought it should have been relaxed sooner than it was, given that it was soon clear we would not be 'like Greece'; and that some of the stimulatory effect of the eventual relaxation was lost because the Coalition covered up, for political reasons, the fact that they were opting for plan B. More recently, as inflation drifted below target, I think the Coalition should have relaxed fiscal policy further to help out potentially ineffecive monetary policy, at least as a precautionary response, given the asymmetric risks posed by the zero lower bound.

Greece’s elections and the future of the Eurozone

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Question 2: Do you agree that refusal of the core EU countries to a renegotiation of the Greek bailout agreements would carry serious risks for the economic well-being of the Eurozone?

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Answer:
Agree
Confidence level:
Confident
Comment:
Yes. Though there are risks to renegotiating too. That could escalate the fiscal conflct between Spain, Italy and North Europe. There are good outcomes: that such pressure leads to the view that overall in Europe there should be strong fiscal stimulus in the short term. But there are bad outcomes too.

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Question 1: Do you agree that a Syriza victory on 25 January would lead to a significant or sustained escalation in spreads for other peripheral Eurozone countries?

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Answer:
Agree
Confidence level:
Confident
Comment:
I'd forecast an increase in sovereign yields in Portugal and Italy. In Spain, this might happen too. On the one hand, there is more evidence that the Spanish recovery is firmly underway. But on the other, the Syriza of Spain is also riding high in the polls and a Syriza renegotiation could encourage anti-EU sentiment, and renewed attempts at fiscal stimulus in contravention with the stability and growth pact rules. These developments might fuel speculation that Spain would exit.

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