The conference will start in 80 mins, and is fully booked. Background material is here.
Month: October 2010
A research colleague, Brian O’Kelly, and I have been looking at the impact of poor bank regulation in Ireland during 2003-2008, and the Irish credit bubble that this poor regulation fostered, on Irish GDP and other economic measures. I am scheduled to talk about this research down in Kenmare this weekend. I want to make some informal remarks in this blog, based on some simple calculations that are easy to follow.
Here is a simple question: what is the effect on cumulative GDP of the massive distortions in bank lending described in the Honohan report? The good news is that the net cumulative effect, even after accounting for the €50 billion bank bailout costs, is not too far from zero. The bad news is that the GDP benefits were all received during the 2003-2007 period when GDP was artificially increased by these extremely poor bank regulation policies, whereas the GDP costs are in the 2008-and-beyond period.
Over at Think or Swim, Paddy Morris accurately summarizes my work on the economics of climate change pre-Anthoff and pre-Weitzman. The comments are interesting too.
Colm McCarthy makes an important contribution to the fiscal debate in today’s Irish Times. I agree with most of it: the precariousness of creditworthiness, the rebuttal of Ray Kinsella, and the reputational damage associated with an IMF/EU bailout.
But Colm continues to provide the best analysis around of half the challenge facing the government – creditworthiness. The other half is the collapse in domestic demand. Colm is right that there is a tradeoff between the two. What he doesn’t offer is suggestions on how the tradeoff can be improved, such as measures that increase the credibility of the four-year plan that would limit the necessary degree of front loading.
Leo Varadkar’s piece in the Sunday Business Post is interesting in this regard. On its face, it might seem that he is advocating an extreme front-loading of the adjustment. The twist is that he advocates using the NPRF to maintain investment spending. Thus he combines a large upfront and permanent improvement in the deficit with measures to limit the deflationary impact. Of course, this could also be achieved by directly protecting the capital budget and imposing bigger burdens on current spending and taxation. But that does not appear politically possible. Deputy Varadkar’s proposal would obviously also be very difficult to pull off. But it is worth debating.
Unlike many others, I think the NPRF had value for its stated purpose of pre-funding future pension costs. But that ship has sailed. More recently, it has served as a valuable liquidity backstop against a self-fulfilling fiscal crisis. It is worth considering now how the fund might be used to improve the creditworthiness-demand tradeoff.
The Economist has three pieces on electric cars (1, 2 in print and 3 online), calling it a big gamble for the car industry, questioning the sustainability of the generous subsidies for the well-to-do, and highlighting the limited reduction in carbon dioxide emissions.
Interestingly, Carlos Ghosn, one of the keenest supporters, appears to believe that 1 in 10 of new cars in 2020 will be all-electric. The goal for Ireland goes far beyond that: 1 in 10 cars (new and old) in 2020 should be all-electric.