The conference on macroprudential regulation originally scheduled for September 4th has been postponed to Friday, January 29th, 2016. See here for all details on the conference. A full programme will be provided closer to the date.
By Liam DelaneyJuly 27th, 2015
I posted earlier in the year on Cormac O’Grada’s recently published book on famines. He has also recently released, among several other works, a working paper on the history of Irish famines since 1300. A version is available here and provides a chronology and history of several Irish famines pre-dating the 1840s.
Policies undertaken from a narrow national perspective that encourage systematic fiscal surpluses coupled with a national consensus on wage suppression between unions and industry facilitated by the state, impact negatively upon domestic spending while increasing national saving and may lead to mercantilist outcomes of systematic policy-induced positive trade balances with large financial flows going the other way. This mechanism in relation to export-dependent countries like Germany has been recognized for a while by leading American economists like Obstfeld (the IMF’s new chief economist succeeding Blanchard) or Bernanke, while many have also pointed out low domestic investment, consumption taxes, and rigidities in the service sector as additional policy-related reasons for this German systematic phenomenon. Read the rest of this entry »
The Dublin Economics Workshop will hold its annual economic policy conference at the Hodson Bay Hotel in Athlone October 16th and 17th next. Proposals in any area of economic policy are invited and should be forwarded, ideally before September 4th, to both of the following: email@example.com and firstname.lastname@example.org.
Programme and booking details will be circulated in due course. The Dublin Economics Workshop is kindly sponsored by Dublin Chamber of Commerce.
By Frank BarryJuly 21st, 2015
Colm McCarthy and I were up in front of the Oireachtas Finance Committee last week to talk about Greece. I attach my speaking notes. (Colm’s were essentially as published in the Sunday Independent the other day). I think it’s fair to say that we both kicked to touch on Pat Rabbitte’s question as to what politically acceptable solution could have been pulled out of the hat. This is a question for the diplomats and politicians rather than economists. The radicals and the establishment parties across Europe had manoeuvered each other so that they ended up painted not so much into a corner as up against an open 10th floor window. Someone was going to be defenestrated. And it was never going to be the strong.
By Liam DelaneyJuly 19th, 2015
Kevin Denny and I are organising a half-day workshop to look at Changes in Well-being in Ireland over the last 10 to 15 years. Obviously this has been an eventful time in Ireland and we think it would be very useful at this stage to draw together what is known about the Irish case. Our specific aim is to consider a wide range of possible outcomes including physical and mental health as well as subjective well-being. Moreover we want to draw on a range of approaches from epidemiology, psychological medicine and the social sciences as well as different types of data. Our intention is to have around 7 presentations with plenty of time for discussion. The event will be held in the UCD Geary Institute on Tuesday November 17th from 12pm to 4pm. A light lunch would be provided. Further details of the talks and how to register will be provided here in due course. Suggestions on the programme still welcome.
By Liam DelaneyJuly 15th, 2015
Since 2008 a number of us have organised an annual conference for people working at the interface of economics, psychology and related areas. Speakers have included international thought-leaders in this area including David Laibson, David Halpern, Robert Sugden, Arie Kapteyn, Ruth Byrne and John O’Doherty as well a diverse range of speakers from across economics, psychology and policy in Ireland and they have contributed to maintaining an active discussion of the potential for this area in Ireland. The next one will take place at the ESRI in Dublin on November 27th. At the previous session we agreed to organise some more adhoc meet-ups in between the events partly to disseminate new ideas and also with a view to establishing a more structured network in this area in Ireland. The first of these meetings takes place in Dublin on July 22nd organised by myself and Sean Gill. It will take place at 7pm sharp at the Roasted Brown coffee shop in Temple Bar. There will be 5 short presentations (to be listed here in the next couple of days) and some discussion about future events. Meet-ups around this area are now taking place in several cities including London and Sydney. I spoke at the Sydney event recently and it was extremely lively and led to several useful follow-ups. There are many people interested in this broad area in Dublin and Ireland more generally. This is intended to a broad forum and we welcome attendance and contribution from academics interested in exchanging ideas with a broad audience, people across different areas including students and people with business and policy interests in this area. For now we envisage the events being structured around short talks where a speaker describes briefly an idea they are working on or thinking about and potentially some suggestions for collaboration. Though there are many other event formats that could be considered. If you are attending please drop me an email at email@example.com
Liam Delaney: Overview of behavioural economics, policy and business.
Michael Daly: Psychology, Self-Control and Policy
Sean Gill: Behavioural Economics and Health
Pete Lunn: Behavioural Economics and Regulation
Q+A and Suggestions for Development of Network
By Philip LaneJuly 14th, 2015
The NBER organised a panel on the Greek crisis last week – video here.
1. “We averted the plan of a financial choking and banking system collapse.” (Tspiras)
You are the prime minister Mr Tspiras. Did you not have a plan B to deal with ECB blackmail? If not, why not? Did you really think that the others would back down because of the possibility of Grexit, when it was so clear that you would be willing to do almost anything to avoid it?
2. The new (and conveniently self-interested) German doctrine that defaults are impossible within the Eurozone. Remember the no bailout clause? Ashoka Mody is surely right: these negotiations will kill the entire European project sooner or later. Better to let countries default when that is what is required.
3. Nice to hear Merkel saying that Greece may win back her trust. If I were Greek I might not trust European promises regarding debt rescheduling. Have we not heard those before?
4. How high is Greece’s debt to GDP ratio going to be now? Over 200%? Even if there is some reprofiling, does anyone think this makes sense?
All in all a great day for Golden Dawn. As for the rest of us: I don’t suppose that any other left wing party that may come to power in the future seeking to challenge the current European economic policy mix will be as feckless as the Tspiras government. The lesson that they will draw from this debacle is: negotiating with Germany is a waste of time; be willing to act unilaterally, be willing to default unilaterally, have a plan for achieving primary surplus if you haven’t already achieved it, have a hard default and euro exit (now possible, thanks to the Germans) option in your back pocket, and be willing to use it at the first sign of hassle from the ECB. A deal could have been done today that would have strengthened the Eurozone, but instead it has just become a lot more fragile.
Update: Wolfgang Münchau is well worth reading, here.
Update: this is also well worth a read.
Update: Charles Wyplosz is well worth reading here. Good to see someone pointing out the obvious about this extraordinary programme, and also taking on the (to my mind bizarre) argument that the headline debt/GDP ratio is irrelevant.
Update: Dae Woong Kang and Ashoka Mody offer a historical perspective here.
By Ronan LyonsJuly 10th, 2015
The site’s readership might be interested in two announcements by the Statistical & Social Inquiry Society of Ireland:
- The first is a general call for papers [PDF] for the Society’s 169th Session, with a deadline of August 7th. Papers are presented to the society and then published in its Journal, which has – if I’m not mistaken – been going since the 1840s, which must make it one of the world’s longest-running social science journals.
- The second is the specific call for submissions for the Barrington Medal, which is intended to recognise promising new researchers in the economic and social sciences in Ireland. More details are available here, and the deadline is July 31st.
1. I see that Juncker is saying that it is a shame that the Greeks walked out of the negotiations last week; and yet the creditor negotiating stance seems to have been “give us everything we want, and maybe we will discuss what you want (debt relief) at some later date”. For an account of the negotiations, see here.
2. I see that Hugo Dixon was describing the parties that got Greece into this mess over the course of several decades as “pro-European”, implying that Syriza is anti-European. Come again? Since when does opposing a particular policy mix (in this case one that has failed disastrously over the course of several years) make you anti-European?
3. I see that Martin Schulz is now denying having said that a no vote meant that Greece would have to leave the euro.
4. I can’t count the number of times I have heard French friends tell me that the problem is that the Greeks don’t pay taxes. (All Greeks, you understand.) What about Troika officials?
5. Aside altogether from the immense catastrophe of the last several years, Greece’s GDP shrank 0.4% in the last quarter of 2014, before Syriza got to power. Just saying.
What I found most galling was the argument that Grexit would bring about an economic catastrophe, as though the catastrophe had not already happened.
Some of the crocodile tears being shed on Sunday night about the humanitarian catastrophe that the Greeks were now supposedly bringing down on themselves (as if the ECB’s refusal to ensure financial stability in that country is irrelevant) I found pretty hard to take. Where have these humanitarians been hiding for the last seven years?
7. No comment necessary:
SPIEGEL ONLINE: Herr Fuest, angenommen, Sie wären wahlberechtigt, wie würden Sie am Sonntag beim griechischen Referendum über die Reformpolitik abstimmen?
Fuest: Mit Ja. Nachdem Ministerpräsident Tsipras sein politisches Schicksal an den Ausgang der Wahl gebunden hat, wäre mein primäres Ziel, ihn und seine Regierung loszuwerden.
8. Faymann: “Europe is known for compromises. Renegotiation until the last minute. Greece didn’t do this when it walked out of negotation.” The Greeks have been making compromises for months; where is the German compromise on debt relief?
There, that feels better.
On the bright side, it seems that around 80% of young Greek voters voted no.
Paul Krugman has a thoughtful op-ed piece in today’s New York Times in which he reluctantly calls for Greek exit from the euro. I share his view on the desirability of Grexit at this juncture, but not his reluctance in expressing that opinion. How could Grexit best be designed, for Greece, for Europe, and for international interests? Below are a few modest thoughts on this. Read the rest of this entry »
Three questions arise. Why would any non-European country be willing to accept another European IMF head? Would it not be better for the Europeans themselves if a non-European IMF head provided us with an “adult in the room” at times of crisis? And why would any European be happy living in a monetary union in which a politicized central bank cannot be relied upon to act as a lender of last resort, and in which their guns could be turned on any (sufficiently small) member state in a time of crisis?
By Alan AhearneJuly 4th, 2015
Today’s Irish Times carries my views on the immense damage that the Syriza-led government has done to the Greek economy in a short space of time. Link is here.
Impact of the economic recession and subsequent austerity on suicide and self-harm in Ireland: An interrupted time series analysis
By Philip LaneJuly 3rd, 2015
New article by Paul Corcoran, Eve Griffin, Ella Arensman, Anthony P Fitzgerald and Ivan J Perry - here.
By Philip LaneJuly 3rd, 2015
The Bank of Lithuania is hosting a conference on this topic today – materials here (including a presentation by Mark Cassidy of Central Bank of Ireland).
By Philip LaneJuly 3rd, 2015
|Network Social Capital and Labour Market Outcomes: Evidence For Ireland|
|Spillover in Euro Area Sovereign Bond Markets|
|Thomas Conefrey, David Cronin||197–231|
|A Formal Investigation of Inequalities in Health Behaviours After Age 50 on the Island of Ireland|
|Eibhlín Hudson, David Madden, Irene Mosca||233–265|
|Is Fuel Poverty in Ireland a Distinct Type of Deprivation?|
|Dorothy Watson, Bertrand Maitre||267–291|
Policy Section Articles
|Deciphering Ireland’s Macroeconomic Imbalance Indicators: Statistical Considerations|
|Policy and Economic Change in the Agri-Food Sector in Ireland|
|Cathal O’Donoghue, Thia Hennessy||315–337|
By Philip LaneJuly 3rd, 2015
By Ronan LyonsJuly 2nd, 2015
Yesterday, former Minister for Finance Charlie McCreevy appeared before the Oireachtas banking enquiry. His refusal to answer whether or not he believed Ireland suffered a property bubble that burst in 2007 was not only great TV, it also brings up some important issues. For example, the Irish Independent reports:
The conflict arose when Mr Doherty asked the former minister if he believed there had been a property bubble in the previous 15 years before the financial crisis. Mr McCreevy insisted he would only answer for his time in office and there had been no property bubble during that time… [after legal advice] Mr McCreevy said from 2003 to 2007 house prices grew at an extraordinary rate. He supposed that was a bubble. But he said: “I don’t believe the policies I pursued helped to create that bubble.”
The clear implication is that Mr McCreevy believes that, if there was any housing bubble at all, its roots do not lie in decisions made in the period 1997-2004, and that in reality there was no bubble at all. Given the title of my doctorate at Oxford was called “The Economics of Ireland’s Housing Market Bubble”, you might not be surprised to learn that I disagree.
First, I think it is important to note that there are two ways of diagnosing bubbles. They can be thought of as statistical bubbles and economic bubbles. A statistical bubble is one where the growth rate in the price of an asset, such as housing, grows at a rate that is unsustainable for any reasonable period of time. Between 1995 and 2007, house prices in Dublin increased by 300% in real terms (i.e. stripping out inflation), or 12.2% a year. Between 1997 and 2004, McCreevy’s term in office, the increase was 136%, or 13.1% a year. (Nationwide figures are comparable, although slightly lower for the period as a whole, although not necessarily in every year.) Thus, by any statisticians metric, it was a bubble – put another way, if 12% growth had continued for 25 years, a house costing €100,000 in 1995 would have cost €1.7m by 2020.
Yesterday, the First of July, was Canada Day.
Discussing the crisis in the Eurozone with some visiting Canadian relatives led to the question How stable is the Canadian currency union?
At first sight it seems to be much more stable than its European counterpart. The Canadian banking system is renowned for its solidness. It is dominated by five national banks that operate coast to coast, supervised by the much-admired Bank of Canada. There is a large national budget that includes important elements of inter-provincial fiscal equalization. Internal labour mobility is relatively high.
But on the other hand the provincial governments are not constrained in their borrowing, there are enormous differences between the economic structures of the provinces, and there is always the Quebec question.
In fact, to a surprising extent, the stability of the Canadian union appears to depend on the fact that, as the author of this article puts it,”there are no Greeces here”. He draws attention to flaws in the design of the Canadian currency union that could come home to roost some day.
If an extend-and-pretend deal is done it will be the third Greek ‘rescue’. Without debt relief it will also be the third to break the IMF rule, adopted after the Argentina failure in 2001, to avoid financing countries with unsustainable debts.
In early 2010 the debt/GDP ratio in Greece was predicted at 115% (it turned out to be 130%), the deficit in double digits and GDP sinking fast. The Fund rewrote its rule-book to get involved in the Troika despite the unwillingness of IMF staff to sign off on debt sustainability. See the account from the CIGI think-tank
The 2012 deal repeated the procedure, this time with haircuts of private creditors.
The Greek economy is again contracting, the budget headed back into serious deficit, the debt ratio headed for 180%. Even with low interest rates and long duration of official debts, no sustainability analysis is likely to look healthy. The bond market, to which Greece must return, agrees.
The IMF cannot credibly repeat the routine of 2010 and 2012 – it does have non-European members after all, and its exposure to Europe is already unacceptable to them. Lagarde, as French Finance minister, opposed Greek debt restructuring in 2010 but there is no guarantee that the IMF board will participate again without haircuts, this time for its European ex-partners. The week could see no deal with Grexit, or Trexit, the end of the Troika.
By Frank BarryJune 26th, 2015
Adele Bergin of the ESRI and I made a presentation to a mini-symposium on Austerity: the Irish Experience at UCD last week. Our analysis points out how wrongheaded it is to suggest, as some have done over the last few days, that if only the Greeks would take their medicine the way we did they might be able to expect an equivalent recovery. This ignores the huge structural differences between the two economies.
Faced with evaporation of the tax base, jittery markets and a need for concessionary funding, our current government and the previous one did what was required on the fiscal side. In the language of economics textbooks however, consolidation was necessary but not sufficient for the timing and pace of the recovery.
The first structural difference is the vastly greater openness of the Irish economy. This cushions the domestic economy to an extent, since imports bear some of the brunt of consolidation.
Irish exports, though they took a hit in the early days of the international crisis, nevertheless propped up the economy in a way that the Greek export sector cannot do, because of the share of exports in the Irish economy, the sectoral pattern of our exports and our portfolio of export destinations.
The fact that Ireland was hugely specialised in goods and services for which international demand remained buoyant massively bolstered the economy. Pharmaceuticals dominate Irish merchandise exports: pharma increased as a share of total US, UK and eurozone imports from 2000 to date (as shown by Stephen Byrne and Martin O’Brien in the Central Bank of Ireland Quarterly Bulletin, 02, April 2015). Computer and information services dominate Irish services exports: these increased as a share of total US, UK and eurozone imports from 2000 to date. Agriculture and food dominate indigenous exports: these increased as a share of total US, UK and eurozone imports from 2000 to date.
Services comprise an unusually high share of Irish exports. Since transmission is almost costless, these are less geographically constrained and substantially less dependent on EU and North American markets than is the case for merchandise exports. In the case of the latter, the MNCs can shift export destinations much more easily than indigenous enterprises can, as reflected in an increased US share as the US recovered earlier from the global crisis. And Ireland of course benefitted much more than other eurozone economies from the weakening of the euro against the dollar and sterling over recent years.
Jobs in export production began to recover rapidly from 2009, driven by labour-intensive indigenous manufacturing exports and by the growth of both indigenous and foreign-affiliate services exports. Ireland’s export-led recovery then fed into domestic demand.
It would be impossible for Greece to replicate this pattern.
And by way of footnote: Even though it’s true that most Irish exports are produced by the foreign-owned multinational (MNC) sector, and that any €1 million of these exports creates less domestic value-added than €1 million of indigenous exports, a different perspective emerges when you look at backward linkages per job. These are particularly impressive in the case of the rapidly growing MNC-services sector.
By Philip LaneJune 22nd, 2015
A serious question we do need to answer: are bank runs, or the potential for bank runs, becoming the ultimate backstop in a currency union comprised of creditor and debtor nations?
In the end the Oireachtas banking inquiry is unearthing the powerful narrative threat of the ‘ATMs running dry’ as driving much of the decision to deliver the 2008 guarantee, Cyprus had a bank run precipitate its crisis, at least partially. Iceland had the same experience, and we all know what is happening to Greek deposits right now, ELA or not.
Dr William Behan, co-author of “Does Eliminating Fees at Point of Access Affect Irish General Practice Attendance Rates in the Under 6 Years Old Population? A Cross Sectional Study at Six General Practices”
Most of the state sponsored; CSO or university department generated statistics on general practice utilisation since 2001 have been based on surveys employing 1 year recollection. Dr. Denny uses Growing Up in Ireland (GUI) the largest database available for the purpose of determining the marginal effect of granting private under 6s patients medical cards. Intuitively this makes sense……or does it when the potential biases of that particular survey data are explored?
We really have to examine biases in statistics collection to determine what is more likely.
(This is a guest post by Dr Kevin Denny of the School of Economics & Geary Institute, UCD).
The extension of free GP care to under 6’s has raised the issue of what the effect will be on GPs’ practices. Understandably they are concerned about the increased demand on a sector that appears to be under strain. I am not aware of any specific research for this age group (mea culpa if I have missed it).
There are several studies for the general populations (various convex combinations of Anne Nolan, Brian Nolan & David Madden). I heard a very interesting recent interview on TodayFM with a GP Ciara Kelly. In the course of this, she said that children with medical cards visit a doctor 6 times a year while those without visited twice. From this she inferred that the new scheme would triple the demand of those currently without free care.A GP that I was once on a radio panel with said something very similar. I don’t know the origins of these numbers. However the average difference between the two groups is not relevant here: you need to know the marginal effect. Children currently without medical cards are different from those with: on average they are, inter alia, healthier and wealthier.
Estimates from other countries are not informative. I searched in vain for a government document that discussed this. We now have very good data in the form of the Growing Up in Ireland study. Here I report some estimates of what the effect of the reform might be. I use the second wave of the infant cohort – the three year olds who should be reasonably representative of the 0-5 age range. As dependent variable I use the question on “Number of times seen or talked with a general practitioner in the last 12 months”. This is top-coded at 20 but there are very few in that category. The variable of interest is whether they are covered by a medical card. I combine GP-only and the full medical card for simplicity.
I have a long list of controls which covers the usual suspects. They include health of the child and mother, income, education and other demographics. I also have a variable that indicated whether their GP visits are covered by private health insurance. Changes to the controls do not make much difference.
There are numerous ways of estimating such models and I used three. For the cognoscenti these are poisson & neg-bin2 regressions and a finite mixture of poissons. The marginal effects are very similar as is often the case. Before we consider those, what is the average difference in the data? In the GUI the population weighted mean of doctor visits for children covered and not-covered by medical cards is: 3.13 and 2.18 respectively. This is very different from the 6 and 2 mentioned above, the source of which I don’t know.
The marginal effects for the different models vary between 0.632 and 0.713, less than the average difference (as you would expect) and a lot less than the difference of 4 mentioned above. For simplicity I will take 0.68 as a ballpark value. So giving free GP care for under 6’s should increase the number of GP visits per child by less than one per annum. We are assuming homogenous effects: you could generalize this to allow the effects differ in various ways. The marginal effect of having private insurance is about 0.34. Since these are probably the better-off of non-medical card holders, this suggests that 0.68 is on the high side i.e. the effect on the kids of the rich of free GP care is probably lower, if anything.
I also estimated the model using the child cohort (the 9 year olds) for whom the marginal effect is about 0.33 incidentally. Estimates for adults tend to be in the 1-2 visits per annum range. So what might this mean in practice? The maximum number of children who could be covered by the present reform is about 270,000. Multiply by 0.68 & this suggests an extra ~183,600 GP visits a year. There are around 2,500 GPs in Ireland so this is about 73.5 visits a year each. If they work on average 47 weeks a year this would mean about 1.56 extra visits a week from the under-6’s for a GP. It would be interesting to know how much of a GP’s time this is likely to require.
The mean is not the only parameter in town. For doctors whose patients are already covered there will be little or no difference. Doctors in more affluent areas will likely bear the brunt. Doubtless there are additional complications.
For example, not all GP’s will sign up. I am ignoring general equilibrium effects, such as any ensuing change in the number of GPs. Perhaps the main known unknown is the labour supply responses of GPs to a switch from a per-visit fee to a capitation grant which encourages them to take on patients but spend as little time as possible with them. Extrapolation is difficult, especially about the unknown.
I don’t mean to suggest that my estimates are best, I can’t explore every possibility in a blog post. I think they are credible though. Readers may have better knowledge of some of these parameters.
A file with the full results is available at http://tinyurl.com/p9cu8ax
The Demographic Transition, which started in Europe in the late 18th century, had a huge positive impact on average human welfare. Population levels and growth rates became dependent upon societal preferences rather than upon famine and disease. The demographic transition has now spread around the world to all continents, except Africa. Surprisingly, Africa has not made the switch. Rather than seeing population growth easing and then stopping, in a typical post-demographic transition pattern, African population growth rates have stayed at a very high rate for many decades. Even in recent years, while many demographers expected a slowdown finally to take hold, African population levels have rocketed up. So for example, from the National Geographic: Read the rest of this entry »
By Frank BarryJune 9th, 2015
In a week when the Irish Times carried reports complaining about the dumbing down of Leaving Cert maths the paper itself provided us with some beauties. An article yesterday by a former head of the School of Education at UCD informs us that “nine per cent of academics at professor level were male and 2 per cent were female”. What about the other 89 (or 77 or 61 or whatever it is)?
Last Saturday’s paper carried a report on ESRI work on overqualified workers. The author revealed himself to hold a masters degree from UCD. The piece (clearly not quoting directly from the ESRI) tells us that “adults whose highest educational attainment is the Leaving Cert earn 31 per cent less on average than those with a higher certificate or ordinary degree, and 100 per cent less than graduates with an honours degree”. I’m sure we all sympathise with how tough it must be to make ends meet on the latter salary.
Even some of their commentators on economics seem to think that a 200 per cent increase means that the thing has doubled. But it could be worse: imagine a 200 per cent decrease.
By Ronan LyonsJune 9th, 2015
Something perhaps of interest to the site’s readership…
This weekend, the Zurich Dalkey Book Festival takes place. This has become something of a sister event to Kilkenomics, which has in recent years hosted leading academic economists such as Deirdre McCloskey and Jeffrey Sachs as well as prominent economic commentators such as Diane Coyle, Simon Kuper and Philippe LeGrain.
This Saturday in Dalkey, I’ll be chairing an event called “Economists: What Are They Good For?“. The three-person panel comprises Dan Ariely, one of the world’s top behavioural economists, and Mark Blyth, author of Austerity – The History of A Dangerous Idea, as well as “the world’s most-quoted living man” PJ O’Rourke.