Professor Rachel Dardis, RIP

Rachel Dardis, Professor Emerita at the University of Maryland died February 23, 2021. An obituary is here. Prof. Dardis was a prolific author and mentored more than 60 PhD students during her career. She spent her academic career in the USA, starting in the 1960s with her University of Minnesota PhD. She retired in 1996 and is survived by her nephew and his two children.

Ar dheis Dé go raibh a hanam.

The Role of the Leaving Certificate Examinations

The Leaving Certificate Exams have three main roles: sorting, incentivizing, and signalling. The exams serve to sort students into third-level courses where the students will perform well and contribute to the performance of their peers; they incentivize secondary school students to study hard and learn, and the examination process allows students to signal their academic abilities and their work discipline by doing well on them.

The pandemic shutdown has created learning and emotional challenges for sixth-year students, and also worsened the “digital divide” between students with supportive home environments and expensive computer technology and those without. An accommodation needs to be made for students who have not coped well in this very challenging environment. It is also sensible, where possible, to reduce the size of examination hall numbers. At the same time, cancelling the examinations entirely and replacing them with very noisy and low-information estimated grades seems an inferior plan.

The government, teacher’s unions, and Department of Education officials need to quickly step up and show courage and wisdom in implementing a solution that is not a muddle-through compromise designed only to appease political pressures. The cabinet including its senior members need to oversee and back whatever solution is quickly chosen and implemented. One obvious possibility would be a rigidly-capped estimated grades option (perhaps capped at H5-O1), together with an exam option for those students who feel that they can exceed the H5-O1 level, or exceed the estimated grade (below H5-O1) that they expect to receive.

Fiscal Council Conference 8th-9th February

The Fiscal Council has an exciting lineup for its fifth annual Path for the Public Finances conference.

This year’s theme is “Ensuring debt sustainability in a post-Covid world”.

The conference will focus on the theme of fiscal policy in the era of high public debt and low interest rates that follows the outbreak of Covid-19.

The conference has two sessions: the first looks at fiscal policy of high debt conditional on current interest rates (debt sustainability analysis; what does it means for the fiscal rules, how should policymakers respond). The second takes a more “big picture” look at the sustainability of low interest rates given high public debt, ageing, financial implications and whether such pressures might influence monetary policy.

The conference takes place over 8th – 9th February 2021 from 2pm – 4pm both afternoons.

Speakers include Olivier Blanchard, Agnès Bénassy-Quéré, Charles Wyplosz, Hélène Rey, Philip Lane, Antonio Fatás and Karolina Ekholm.

Full programme and Registration details are available at the Fiscal Council’s website:

Economist Job Opportunities with the PBO

The Parliamentary Budget Office (PBO) in the Houses of the Oireachtas Service is seeking to recruit AO economists to fill vacancies which exist in the PBO. The positions would suit recent masters graduates or degree graduates with research work experience.

Candidates should acquaint themselves with the essential entry requirements for applying for this position, as described in the information booklet for the competition. Only applications completed via and submitted to Recruitment@oireachtas.ie and submitted on the official application forms will be accepted in this competition. Applications received after the deadline will not be accepted.

The deadline for receipt of applications is 1pm on Wednesday, 24 February 2021.

More information on the Parliamentary Budget Office and the type of work it undertakes can be found on www.oireachtas.ie/pbo.

Occupational Pension Funds in Ireland: What do we know?

A guest post by Kenneth Devine (Central Bank of Ireland) on new occupational pension fund data highlighting household exposure, concentrated asset holdings and the impact of COVID-19.  [Disclaimer: This blog represents the author’s views and not those of the Central Bank of Ireland]

Pensions are the primary source of income to households in retirement. The volatility and economic shock associated with COVID-19 have compounded pre-existing issues for pension systems. These include aging populations, the low interest rate environment and the prevailing low yields on safe assets (OECD, 2020).

In a recent Behind the Data publication, Ciarán Nevin, David Mulleady and I ask the question – What do we know about occupational pension funds in Ireland?  Our note highlights the role of occupational pension funds as a household asset, outlines the breakdown of financial assets, and examines the impact of the pandemic on these holdings. An overview of the key findings can be seen in Figure 1 below.

Figure 1: Overview of key findings

While previous work by the OECD (2014) provided a comprehensive review of the Irish pension system, its analysis of occupational pension funds was constrained by a lack of data. New Central Bank of Ireland statistics covering occupational pension funds help to fill this gap by providing a better understanding of the structure and asset holdings of the sector.

We show that, in June 2020, Irish occupational pension funds had assets of €118 billion, accounting for 30 per cent of household financial assets. This is the second largest household financial asset behind currency and deposits. Household sector housing assets accounted for €542 billion in the same period.

According to the Pensions Authority’s 2019 annual report, the Irish sector consists of over 75,000 active occupational pension funds, representing almost half a million active members. This represents over 90 per cent of total euro area pension funds by number. The size, and role, of occupational pensions varies across euro area countries (Curos et al., 2020), with total assets of the pension fund sector amounting to €3 trillion at September 2020.

We have seen a transition away from Defined Benefit (DB) funds in recent years (fall of 50 per cent in number of active schemes since end-2009). For Defined Contribution (DC) pension funds, the member’s income in retirement is dependent on asset performance. Therefore, the switch from DB to DC pension funds has shifted investment risk from the corporate sector to households (Brown, 2016). Households, and their retirement income, are now increasingly exposed to financial market shocks.

The Behind the Data piece outlines that Irish pension funds primarily invest in investment funds shares and unit-linked insurance products. Combined, these two instruments account for three quarters of the sector’s balance sheet. However, structural differences in asset holdings exist across DB/DC pension funds. While the larger DB pension funds are seen to directly invest in hundreds of diverse assets, smaller DC pension funds tend to predominantly hold a limited number of investments.

Figure 2: Impact of COVID-19 on pension fund asset prices

As can be seen in Figure 2, at the onset of the COVID-19 pandemic the total value of pension fund assets fell by 6.5 percent (€7.9 billion). These asset values largely recovered across Q2 and Q3 2020 to sit at €118 billion. The movements were predominantly caused by financial market price gains and losses as the pandemic, and global policy responses, evolved. At Q3 2020, asset values were 1.8 per cent below pre-pandemic levels.

Going forward, the Central Bank will publish Pension Fund Statistics information releases on a quarterly basis. The next steps in developing this dataset will include an investigation into asset breakdowns by their sector and geography, to further explore these household investment exposures.

Researchers interested in hearing more about the data can contact Kenneth Devine.