Jagjit S Chadha

Of Fiscal Straitjackets and Flexibility - NIESR Our fiscal rules have acted to hold back our economic progress. We need to commit to transparent and accountable assessment of our economy by the Chancellor

🗓️-4 ⏳ #WeekendReading and countdown to the #SpendingReview

"Our #FiscalRules have acted to hold back our economic progress, and have led to a trivialisation of fiscal policy making"

Former Director @jagjitchadha.bsky.social‬ #blog on British fiscal framework

📣New JI WP📣published by @jagjitchadha.bsky.social @econcam.bsky.social et al. : 'The Interest Rate Effects of Gov't Debt Maturity: Solving the Bond Conundrum'.
Read the paper and find out more: www.janeway.econ.cam.ac.uk/publication/...

It is possible that the behaviour of US term premia since "Liberation Day" may result from the expectation of a lengthening in debt maturity in response to the tariff induced negative AS supply shock.

n/n

The dominance of the average maturity of Federal debt makes inflows into US Treasuries from the
foreign official sector superfluous in explaining long-term rates. Inflows have no statistically significant impact on premia. 4/n

Second, shortening of the maturity of public debt in the early 2000s accounted for the reduction in the forward long rate and term premium. We thus explain the Greenspan conundrum – the failure of long-term interest rates to
rise in the face of a tightening at the Fed. 3/n

We find that a one-month increase in the average
maturity of debt outstanding held outside the Fed Reserve is associated with a rise of 10-13 basis points in the 10-year
term premium. Our estimates are consistent with significant portfolio balance
effects. 2/n

Very pleased to release our paper with colleagues at the BIS in Basle. Sadly Philip Turner died last year and this paper honours him. Short thread follows. 1/n

www.econ.cam.ac.uk/publications...

The excitement over ONS February's estimate of monthly GDP is misplaced. The estimate is based on output data only. If we look at the components of the production sector since 2022, I would not get out any bunting. (Obs services and construction matter are also counted.)

The US current account deficit results from an excess of investment over savings - trade frictions play a relatively minor role. This is because of impatient consumers, fiscal deficits and the availability of international funds. The Metzler diagram from my book, The Money Minders, Chapter 5. 1/n

The answer, given public and private debt levels is not yet more borrowing. But mechanisms to build savings, control fiscal policy and channel funds into country-wide infrastucture and capacity-building, especially in areas hit by globalisation. In other words, old-fashioned good governance. n/n

So why are US long term rates rising in light of "Liberation Day"? Put financial plumbing to one side. Note that under a recession, debtor country investment demand will shift out, raise the current account deficit at "c" and require higher global rates to attract capital (along S'). 3/n

At interest rates below "a" (market clearing interest rate for debtors e.g. the US) the US runs a deficit funded by savers in the rest of the world. With capital mobility and with "b" (market clearing interest rate for creditors e.g. China) below "a", there will be persistent deficits. 2/n

The US current account deficit results from an excess of investment over savings - trade frictions play a relatively minor role. This is because of impatient consumers, fiscal deficits and the availability of international funds. The Metzler diagram from my book, The Money Minders, Chapter 5. 1/n

What should rational players in world trade (the EU, China) do next? Instead of being tempted into more tit-for-tat tariff hikes with the US, they should try, through the WTO, to lower tariffs between the other trading blocks. The world trading system could turn away from the USA.

More generally we have seen a universal tariff of 10% on all countries with some facing much higher numbers: Vietnam are facing a tariff of 46%! A lot now depends on how other countries respond. @niesrorg.bsky.social @jagjitchadha.bsky.social @adrianpabst.bsky.social

Labour's economic strategy is outdated. I can fix that | Jagjit Chadha The last thing we need from Wednesday’s spring statement are incremental changes to tax and spending. Let’s have a clear plan, says Jagjit Chadha of Cambridge University

Britain has a severe problem with its sluggish rate of growth; while Labour wishes to tackle it, it is going about it the wrong way, @jagjitchadha.bsky.social @theguardian.com

www.theguardian.com/commentisfre...

As we enter a potential #tariff war, I am reminded of my #StudiumGenerale @Unimarburg.bsky.social in 2010. Trade can collapse quickly and with it, income and productivity. Time to worry....

I am very much looking forward to this on Friday....

"Understanding the Effects of #Brexit on UK Productivity" ⚙ 🔍

In this NIER article, our @econstevem.bsky.social & @durhameconomics.bsky.social's Anamaria Nicolae & Michael Nower analyse the impact of Brexit on trade & #productivity 📊⬇ @durham-university.bsky.social
www.cambridge.org/core/journal...

Response to the 2025 Spring Statement - NIESR The 2025 Spring Statement was delivered against a background of continuing low growth and above target inflation. Did it deliver what was needed for the economy?

The #SpringStatement is in reality tinkering with our spending plans.

Are we now re-entering the realms of #finetuning in order to meet a variable target 4-5 years hence? This is a worry.

niesr.ac.uk/publications...

Rather than a battle of accounting practices, we need to start from a government view on what it wants to achieve this Parliament on growth and productivity. Then to see what can be funded subject to a clear, transparent account of the risks to fiscal sustainability.

Labour's economic strategy is outdated. I can fix that | Jagjit Chadha The last thing we need from Wednesday’s spring statement are incremental changes to tax and spending. Let’s have a clear plan, says Jagjit Chadha of Cambridge University

The Treasury needs to stop obsessing about fiscal rules: the Spring Statement should set out a growth strategy.

@jagjitchadha.bsky.social in @theguardian.com

www.theguardian.com/commentisfre...

Labour's economic strategy is outdated. I can fix that | Jagjit Chadha The last thing we need from Wednesday’s spring statement are incremental changes to tax and spending. Let’s have a clear plan, says Jagjit Chadha of Cambridge University

My Op-Ed in today's @theguardian.com. Let's stop tinkering and adopt a credible economic strategy.

www.theguardian.com/commentisfre...

Labour's economic strategy is outdated. I can fix that | Jagjit Chadha The last thing we need from Wednesday’s spring statement are incremental changes to tax and spending. Let’s have a clear plan, says Jagjit Chadha of Cambridge University

Well worth reading @jagjitchadha.bsky.social thoughts on what should and should not be in Wednesday’s Spring Statement. www.theguardian.com/commentisfre... @niesrorg.bsky.social @adrianpabst.bsky.social

‘Does it score?’ How the OBR became the key arbiter of the Treasury’s sums Chancellor has very little headroom within her fiscal rules but is keen to keep Office for Budget Responsibility on side

We can veer away from a rules -based target. We need though to explain why and when we will be back on track.

@rjpartington.bsky.social

www.theguardian.com/uk-news/2025...

The State of the Nation's Economy - NIESR We need to introduce more accountability and transparency into fiscal policy based around the genuine economic and social performance of the United Kingdom.

In one week, the Chancellor will deliver her Spring Statement to parliament ⏰

At NIESR, we have long advocated the need to introduce more accountability and transparency into fiscal policy 💬👇 @jagjitchadha.bsky.social @econstevem.bsky.social @adrianpabst.bsky.social
niesr.ac.uk/publications...

Cheeky....

I do not know for sure. But they will not remember in the morning!!

Not the way to fund public investment.

🎩 @maxmosley.bsky.social @niesrorg.bsky.social