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Prof Jagjit S. Chadha

Posted: 20 November, 2018 - 11:09

Those of us with long memories will have seen elements of previous political and economic crises in the last week’s events.  There was a whiff of the resignation of Mrs Thatcher in November 1990, the end of Sterling’s membership of the European Exchange Rate Mechanism in September 1992 and not a little of the financial crisis, which was triggered in August 2007.  And yet while the former events bookended a recession and the latter led to one, so far our political crisis has not led to an extreme economic downturn.  I think this is because the most likely outcome for an end game in the exit process is some form of agreement that leaves near frictionless trade in place with the EU for some years to come.  Such an outcome, despite the political opinions of it, will limit the transitional costs of an exit from the EU. 

Prof Jagjit S. Chadha

Posted: 5 June, 2018 - 12:23

Worrying developments in Italy and elsewhere in the Euro Area underline the implications arising from poor management of fiscal risks.  Fiscal policy can be a great way of sharing risks faced by households but there is an ever-present tension between acting now in the face of known shocks and retaining some space for future action in response to as yet unknown shocks. 

Prof Jagjit S. Chadha

Posted: 5 March, 2018 - 12:03

In light of new announcements expected from the Prime Minister today, heavily trailed as an attempt to place housing at the heart of the policy agenda once again, it is well worth looking at the role that the UK’s housing market plays in the macroeconomy.

Prof Jagjit S. Chadha

Posted: 6 February, 2018 - 17:47

As we have pointed out in recent editions of NIESR’s Economic Review the UK economy is showing signs of a divergence, with growth slowing here alongside growing evidence of a sustained recovery in the rest of the World.

The Referendum result and consequent uncertainty over the exact form of future trading relationships imparts two substantive effects. First, it tends to reduce expected trade in goods, capital, labour and services with the EU. Secondly, the uncertainty over future trading relationships will tend to lead to a delay in domestic investment or a diversion internationally to more certain destinations overseas.

Prof Jagjit S. Chadha

Dr Monique Ebell

Dr Garry Young

Posted: 5 January, 2018 - 12:17

Three senior members of the Institute were asked by the FT for their views on the year ahead.  In the interests on transparency, we publish those replies.  The answers given are from the Director, Professor Jagjit Chadha (JC), the Director of Macroeconomic Modelling and Forecasts, Dr. Garry Young (GY), and the Associate Research Director for Trade, Investment and Productivity, Dr Monique Ebell (ME).  

 

Prof Jagjit S. Chadha

Posted: 15 December, 2017 - 10:17

The agreement in principle on the EU Budget (along with some related aspects of the negotiation) announced on Friday 8th December seems sufficient to trigger further progress on trade talks. The basic premise for an agreement on the Budget is that even though the UK may leave the European Union formally in March 2019, the financial relationship cannot end without consideration of existing financial obligations, contingent liabilities and the splitting of assets and liabilities that have been agreed or formed during the period of the UK's membership of the EU.  

 

Prof Jagjit S. Chadha

Posted: 17 November, 2017 - 11:15

There are two coincident problems facing the UK economy. The first is well-known and part of the standard economic narrative and the second is almost not really paid much attention to at all. In the first case I am talking about the productivity puzzle and in the second the long sequence of primary deficits (before interest payments on public debt) on public expenditure, that have been a feature of economic life in the UK, remarkably enough, since 2002-3.

 

Prof Jagjit S. Chadha

Posted: 3 November, 2017 - 13:22

This week the Institute published its November Review and much of the focus was rightly on our projections of an increasing divergence in growth between the UK and other advanced economies.  But what we also did was to look under the bonnet of these aggregate effects and try to understand what globalisation has meant for the different sectors, regions and households that add up to the averages.  In this blog I shall illustrate by examining, the composition of post-tax income growth, why so many sections of the household income distribution are dis-satisfied with economic progress since the financial crisis.  

Prof Jagjit S. Chadha

Posted: 27 October, 2017 - 10:35

The events in the financial markets of 2007 and 2008 represented a huge economic and financial shock and the correct response was to run public deficits and to loosen monetary policy rapidly and for an extended period to facilitate as orderly an adjustment to these shocks as possible.  These initial responses were intended to be temporary, as indeed are all monetary interventions.  But ten years after these events, we are still running fiscal deficits and monetary policy seems ultra-accommodative.

 

Prof Jagjit S. Chadha

Posted: 9 June, 2017 - 11:10

The hung Parliament is a vote for ‘None of the above’.  Sadly, none of the political parties addressed the economic issues that have dominated the experiences of households over the past 10 years.  Productivity has barely progressed in a decade and as a result real wages have hardly increased either.  

Prof Jagjit S. Chadha

Posted: 5 May, 2017 - 12:36

When reforming, the UK is more like a sprinter than a marathon runner. Long periods of inaction and arduous behind the scenes preparations, lead to sudden jolts of activity.  And so it was twenty years ago when the incoming Labour government decided to make a surprise announcement about the creation of operational independence for the Bank of England on its fifth day of office. 

Prof Jagjit S. Chadha

Posted: 31 March, 2017 - 11:55

Why does long growth or what economists used to call secular trend matter? It is essentially about compound interest. At a growth rate of 2% per year, income will double every 35 years. Over the 315 years from 1700 to 2015 in the UK we have reasonable or passable data for Britain stating that income has grown at an average rate of 1.69%, which implies a nearly two hundred-fold increase in income (widget production) over this long period. 

Prof Jagjit S. Chadha

Posted: 24 March, 2017 - 11:08

The UK has often been described as being an economically divided country. Initially this divide was related to the decline of traditional primary (for example, mining) and secondary (manufacturing) industries and the rise of the service sector in London, which increasingly provided legal, financial, accounting and educational services to the rest of the world. Oddly enough both sets of industries, whether in decline or still growing by the late 20th century, had strong roots in the industrial revolution. This simple observation tells us that we cannot know today which sorts of industries will necessarily thrive into the 21st century: Hoxton hipsters making furniture might dominate the pricing of credit default swaps.

 

Prof Jagjit S. Chadha

Posted: 17 March, 2017 - 11:42

First let's ask what explains household debt? Well if the household formulates a rational plan that conditions on its lifetime budget constraint, over its lifetime debt should be zero. With many overlapping households we might expect to observe debt in a young economy when the proportion of young outweighs the old.

Prof Jagjit S. Chadha

Posted: 10 March, 2017 - 14:55

The resilience of output following the referendum has been most welcome and has led to many forecasters gradually cranking up their central views for 2017.  On Wednesday, the OBR plumped for a central case of 2% this year compared to 1.4% in November.  The Institute itself also published an upward revision in February and thought that output would be most likely to grow by some 1.7% this year.  But it is the composition of that growth and the risks present a great concern.

Prof Jagjit S. Chadha

Posted: 3 March, 2017 - 11:59

In the week before the Spring budget, we are all supposed to get excited about the odd change in tax rates or the TV license fee. And worry about the excise duties on various viscous hydrocarbons. In fact, what we ought to be worried about will probably mostly be missed by commentators: that is whether the government is meeting its obligation to reduce risk.

Prof Jagjit S. Chadha

Posted: 17 February, 2017 - 13:12

There is a growing sense that globalisation, by equalising the international price for labour and for capital, has acted to reduce both real wages and real interest rates – the former means that labour earns less but the latter tends to inflate asset prices. This wedge in the return to capital and labour may help us understand why income and wealth inequality has increased in the recent past.

Prof Jagjit S. Chadha

Posted: 20 January, 2017 - 13:09

How does a government reduce its public debt burden relative to national income, which is what I mean by a fiscal consolidation? There are a number of obvious instruments that might bear immediate fruit: reduce the flow of government deficits by increasing taxes or reducing government expenditure or to develop expenditures that increase output by more than the increase in the deficit. The latter is of course the search for the holy grail of a multiplier greater than one and the former is often termed 'austerity'.

 

Prof Jagjit S. Chadha

Posted: 13 January, 2017 - 09:24

Outside it is rather miserable. It is wet, windy and dark. And Blue Monday looms. But at the Institute January is a forecast month, so we are kept warm by the comfortable whirring of economists running models, assessing data, understanding deviations of outcomes from expectations and applying dollops of judgement.

Prof Jagjit S. Chadha

Posted: 6 January, 2017 - 16:55

    In a Keynesian view of the world, the joint actions of monetary and fiscal policy set the level of overall demand in the economy.

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