At the risk of setting up Seamus for apoplectic rage in comments, he nicely gathers together much of the recent good news on the Irish economy in an article for the Evening Echo. The text of the article can be accessed via his excellent Economic Incentives website here. We still face serious challenges, as Seamus clearly notes, but it is no harm to accentuate the positive every now and then.
This event will take place on October 13th at the Radisson Blu Hotel (Golden Lane, Dublin). To confirm attendance, email patricia.kearney at centralbank.ie.
8.45 – 9.00 Opening Remarks
Patrick Honohan, Governor, Central Bank of Ireland
9.00 – 11.15 Session 1: Estimates of house prices and negative equity
Chair: Gregory Connor, NUI Maynooth
Paper 1: “Negative equity and regional house prices in the Irish market”
Gerard Kennedy and Tara McIndoe Calder, Central Bank of Ireland
Paper 2: “Who has negative equity? Some insights from loan level micro-data”
David Duffy and Niall O’Hanlon,
Economic & Social Research Institute and Central Statistics Office
Paper 3: “Decomposition of Irish house prices 2000-2010”
Yvonne McCarthy and Kieran McQuinn, Central Bank of Ireland
Discussant: Ronan Lyons, Balliol College and Department of Economics,
Today’s article in the Irish Times series is by John O’Hagan – you can read it here.
Details are here.
Jointly with Martin Brown of St Gallen University, we have written a new World Bank working paper “Debt Overhang in Emerging Europe?“. (This is a background paper for a forthcoming World Bank report “Golden Growth: Restoring the Lustre of the European Economic Model.”)
While the main focus is on emerging Europe, there is also a fair amount of comparative data for the Euro area periphery; in addition, there is an extensive literature review on debt overhang issues.
Summary: This paper assesses the extent to which debt overhang poses a constraint to economic activity in Emerging Europe, as the region emerges from the recent financial and economic crisis. At the macroeconomic level, it finds that the external imbalance problem for Emerging Europe has been in most cases more one of flows (high current account deficits in the pre-crisis years) rather than large stocks of external debt. A high reliance on equity funding means that net external debt is far lower than net external liabilities. Domestic balance sheets have expanded quite rapidly but sector liabilities remain relatively low compared with advanced economies. With the important exception of Hungary, public debt levels also remain relatively low in Emerging Europe. At the microeconomic level, the potential for debt overhang in the corporate sector is limited to a few countries: Latvia, Lithuania, Estonia, and Slovenia. Due to the low incidence of household debt, hardly any country, except Estonia, seems to face a threat of debt overhang in the household sector. The strong increase in non-performing loans compared with pre-crisis bank profitability suggests that debt overhang in the banking sector is a threat in Ukraine, Latvia, Lithuania, Hungary, Georgia, and Albania. Financial integration of Emerging Europe seems to have contributed to the transmission of the crisis to the region. At the same time, this integration is helping the region in managing the crisis by concerted actions of the major players.
I do not have time to fully develop this point but there have been several media reports in recent times on the adverse impact of Ireland’s improved road network on the demand for inter-city air travel and train travel within Ireland. These reports focus on the negative impact on the suppliers of air and train travel and the requests for increased public funding to upgrade air and train networks to compete. However, the more direct public-interest interpretation is that part of the payoff to the major investment in the road network is that fewer resources need to be absorbed by providing air and train links where the road network now dominates. (If it turns out that environmentally-optimal road pricing would call for more trains and planes, that is a valid argument. But to justify extra investment just on the basis of losing market share to the road network is not a strong argument in itself.)