The Irish Economy

The importance of integrating both psychology and economic history into economics and economic policy has been borne out in recent years (see my Kenmare talk for brief overview of some recent developments in behavioral economics). For the last five years or so, we have been holding some events to develop research at the intersection of economics and psychology in Ireland. The speakers are a mix of PhD students, researchers in public institutions and academics. This year’s main session take place at the Geary Institute on Friday November 25th. All are welcome. Please RSVP to geary@ucd.ie There will be a special issue of the ESR based on some of the papers from this year’s session. The panel session will be used to discuss how developments in the recent literature have policy relevance. There is no registration charge.

Programme:

9.00: REGISTRATION

9.15: Organ Donation and Individual Consent- The role of Family Consent in Donation Systems.
Clare Delargy- UCD Geary Institute

9.45: Credit Cards: Friend or Foe.
Yvonne McCarthy - Central Bank of Ireland.

10.15: Understanding Taxpayer Behaviour – New Opportunities for Tax Administration.
Keith Walsh- Revenue Commissioners

10.45: BREAK

11.00: Deity and Development: A Study of the Impact of Religious Culture upon Social and Economic Development.
Ryan McKee- Queen’s University Belfast

11.30: The Role of Economic Psychology in Students’ Term-Time Employment and Academic Achievement.
Martin Ryan- UCD Geary Institute

12.00: LUNCH

13.00: Corruption and Well-Being
Rob Gillanders - University College Dublin

13.30: Subcultures in Household Financial Decision-Making: An Exploratory Study of Risky Asset Ownership in the Netherlands.
Michael Dowling- DCU

14.00:BREAK

14.15: Behavioural Economics and participation in recycling programmes
Marie Brugligio- University of Malta

14.45: Behavioural Economics and Policymaking: Learning from the Early Adopters.
Pete Lunn, ESRI

15.15: BREAK

15.30: Behavioural Economics and the Irish Pension System
Liam Delaney- Stirling University and Geary Institute

16.00: Is the health impact of socioeconomic status explained by objective financial resources or subjective social status?
Michael Daly - Manchester and Aberdeen.

16.30: Panel Discussion

The statement is here.

The government’s statement is here and specifies some changes to the MOU:

There were a number of changes agreed to the Memorandum of Understanding, which include:

• As already set out by Minister Noonan: “Initial resolution funding for Credit Unions of €250 million will be made available from the Exchequer in quarter 4 2011″ - which will be based on a principle of recoupment over the medium term via a levy under the Central Bank and Credit Institutions (Resolution)(No.2) Bill 2011 (when enacted).

Credit union legislation to be published by quarter 2 2012.

The fiscal responsibility bill to be published by quarter 1 2012.

The release is here.

The data for the Non-Financial Accounts are here.

The data for the Financial Accounts are here.

I’d be interested to know the source of the figures cited in this article by Vincent Browne on income tax rates paid by higher earners. It certainly isn’t the last Revenue Commissioners statistical release on tax payments by income distribution, which relate to 2009. Anyway, it’s interesting to compare the figures reported in the article with the tax payments generated by plugging in the same salaries into this useful online tax calculator.

This new ECB Occasional Paper is available here.

ABSTRACT
This paper explains the various concepts of government debt in the euro area with particular emphasis on its size and composition. In terms of size, the paper focuses on different definitions that are in use, in particular the concept of gross general government debt used in the surveillance of the euro area countries, the total liabilities from the government balance sheet approach, and the net debt concept which subtracts government financial assets from the liability side. In addition, it discusses “hidden debt” in the form of implicit and contingent liabilities. In terms of composition, the paper provides information about euro area government debt broken down by maturity, holder or the currency of issue. All these indicators illustrate a sharp increase in government debt in most euro area countries as a result of the crisis. This in turn has several policy implications: (i) the growing government debt ratios need to be stabilised and put on a downward path which improves market confidence; (ii) fiscal surveillance needs to put more emphasis on government debt indicators than in the past; (iii) government financial assets could play a role when analysing solvency issues; (iv) implicit and other off-balance-sheet government liabilities need to be carefully monitored and reported; (v) the gross debt concept should remain the key basis for fiscal surveillance in the EU and for the Excessive Deficit Procedure in particular; (vi) beyond the size of government debt its composition is also a key factor behind public finance vulnerabilities.

On Tuesday October 25th, Trinity College Dublin will host a public roundtable on the European Debt Crisis, as part of the Policy Institute’s 2011-2012 Henry Grattan Lecture Series. This event will take place 4pm-5.45pm.  The event is free - all welcome.  Please let Helen Murray at Policy Institute know if you plan to come along (policy.institute at tcd.ie).

Co-hosted by the IIIS, this will feature some very good international experts:

• Mike Dooley (UC Santa Cruz)
• Peter Boone (LSE)
• Jean Pisani-Ferry (Bruegel)
• Ciaran O’Hagan (Societe Generale)

More details are available here.

Before the public policy event, there will also be a IIIS research workshop on October 25th from 12-3 in the IIIS seminar room, with presentations by

• Mike Dooley, TBA
• Alan Ahearne and Guntram Wolff, “The Debt Challenge in Europe”
• Kristin Forbes and Frank Warnock, “Capital Flow Waves: Surges, Stops, Flight and Retrenchment“
• Philip R. Lane and Gian Maria Milesi-Ferretti, “External Adjustment and the Global Crisis”

More Kenmare-related fare (sorry I couldn’t resist). This time it’s from Don Walshe and Dermot O’Leary of UCC and Goodbody Stockbrokers, respectively. I attended this talk and the paper they produced is just now online at Finfacts as a Goodbody note. The pdf is here. The data they provide is really useful to guide our discussions on debt and deleveraging in the Irish banks, especially (for me anyway) sections 3 and 4 on balance sheet dynamics. O’Leary and Walshe argue for a slower deleveraging process to help aid growth in the economy. From the piece:

A quick note on comments. I’ve gotten a few complaints discussions aren’t being kept (roughly) on topic, so I’ll be a bit more aggressive in deleting comments that don’t add to a discussion on debt and deleveraging in the Irish economy.

Thanks to Patrick at Dublin Chamber of Commerce, here is a link to Mr Chopra’s address tonight at DEW Kenmare.

Click here to listen to the talk, it’s about 30 minutes long.

Here’s the text of the speech from the IMF.

And in other news, we may have another solution to Ireland’s economic crisis that takes full account of our constrained funding position.

Landon Thomas features the views of Peter Mathews in this NYT piece.

The Central Bank released a discussion paper this week on the management of liquidity risk  - it is available here.  Comments are invited until December 31st to liquiditydp at centralbank.ie.

This report is available here.

The latest issue of the Economic and Social Review carries a comprehensive essay by Carol Boate on the competition issues in the primary healthcare (GPs, dentistry, pharmacy) sector.

Another day, another ranking, this time of Economics departments by Tilburg University.

The global ranking has Vrije U in 77th position. You’ll need to use the “ranking sandbox” to discover that UCD is 157, TCD 233, NUIM 503, and NUIG 696. DCU, DIT, UCC and UL are not ranked.

This ranking’s method is simple. Papers are attributed to the department at the time of publication, rather than to the current department of the author. Quality weighing is simple too: publications are given a weight 1 if in a listed journal, and 0 otherwise. The list has 36 journals (although another 32 can be added in the sandbox). The list contains all of the obvious journals, and omits quite a few journals that are equally respectable — and why use a subjective criterion for respectability anyway when objective quality measures are readily available?

The Tilburg ranking thus compares badly to the IDEAS/RePEc one, but the results are not that different: Vrije U is 76, UCD 198 (Geary) or 225 (Econ dept), ESRI 252. Other Irish departments do not make it to the top 5%.

Both rank the total output of the department, not correcting for the number of faculty. Large schools are thus on top.

UPDATE:

The new MBA ranking by the Economist is out too. UCD ranks 38th, and is the only Irish entry. The method is a lot more sensible than the Tilburg one.

The new issue of the estimable Dublin Review of Books carries this article by Michael O’Sullivan.

The new release is here.  Among the headline numbers -  household savings rate remaining high, at 18.5 percent of gross disposable income in Q2 2011 (it was 19.6 percent in Q2 2010).

The ESRI Budget Perspectives conference has been taking place this morning.   It featured a fiscal panel with the following presentations

• John McHale
• John Fitzgerald
• Philip Lane

Also highly recommended is the paper by Tim Callan et al:  Taxes, Welfare and Work Incentives

A reminder that this well-timed Central Bank conference on the Irish mortgage market takes place today.

The bill is available here.

I was asked to write this chapter for a forthcoming RIA volume on Irish foreign policy. A summary:

A country’s foreign policy is largely driven by what it perceives to be in its economic interests. That this does not provide a complete picture is evidenced by the fact that Irish development assistance has never taken the form of tied aid. Nor can the influence of powerful vested interests be discounted. A case can be made that Ireland turned protectionist again once membership of the European Union had been achieved. Agricultural and sheltered-sector interests have sought to stymie the liberalisation efforts of the WTO and the European Commission respectively. A further complicating factor is that a society’s own economic interests can occasionally be miscalculated. Joseph Lee has noted that “while the ‘political’ skills of Irish representatives in negotiating positions are widely acknowledged… there seems to be no comparable criterion for assessing the calibre of conceptualisation of the Irish case.” Irish foreign policy through the years has nevertheless recorded many successes in defending the economic interests of the citizens of the state.

The paper considers the political and economic determinants of Irish trade policy, the evolution of its inward foreign direct investment strategy, and the country’s position on international migration and on the broadening and deepening of European integration. A separate case study focuses on how successive governments have sought to defend and exploit the advantages of Ireland’s low corporation-tax regime in international negotiations.

The first report from the Irish Fiscal Advisory Council is available here.

The report is now published and is available here.

Fintan O’Toole highlights the data provided by the OECD Government at a Glance 2011 report in looking at comparisons in public sector pay rates across countries.   As he emphasises, these data adjust for differences in purchasing power across countries.  This is relevant if the goal is to establish the relative living standards of workers in different countries, which in turn is relevant in the recruitment of internationally-mobile workers.

However, it is also relevant to compare pay levels between public and private sectors within a country (adjusting for occupational and skill characteristics etc), since public and private sector workers face a common domestic cost of living and, over some time horizon, the relevant choice for many individuals is whether to work in the public sector or private sector.  This is why rigorous analysis of comparative pay trends across public and private sectors is important in determining whether public sector pay levels are at an appropriate level.  An up-to-date study along these lines would be helpful.

Finally, Fintan O’Toole postulates that the cuts in public sector pay since 2008 mean that PPP-adjusted pay levels for public sector workers have likely declined in Ireland relative to other countries since then. While nominal pay reductions have been substantial, it is also the case that the price level in Ireland has declined relative to many other countries since 2008 so that the decline in PPP-adjusted pay levels is much smaller. For example, the ratio of the Irish price level relative to the average price level for the euro area was 1.17 in 2008 and 1.07 in 2010.

Olivier Godart, Holger Görg and Aoife Hanley write on the Irish experience in this paper.

Abstract: Starting from the observation that all firms in Ireland (foreign and domestic in manufacturing and services industries) were hit by the crisis, the paper asks whether there is a difference in the behaviour of foreign and domestic firms. One hypothesis is that foreign multinationals are less linked into the Irish economy, so more likely to leave once the economy is hit by a negative shock. The paper discusses background hypotheses before giving empirical evidence from firstly aggregate data, and secondly firm-level observations. The analysis of the latter suggests that foreign firms are not more likely to leave during the crisis than Irish firms. Some policy conclusions are offered in the paper.

The announcement is here.

I’ve agreed to participate in some sessions at this year’s Kilkenomics which will take place between Wednesday November 2 and Sunday November 6.  While obviously leaving myself open to (perhaps fair!) jokes about the differences between economists and comedians, I’m looking forward to it. I’d recommend people to take a look at the line-up. There are lots of interesting sessions on important issues and many excellent speakers, including Jeff Sachs from Columbia.

Tonight’s TV seems calibrated for an IrishEconomy.ie audience. To keep you all away from reruns of America’s Next Top Model after the news, we’ve got Richard Curran’s Property Crash, Where to Now?, and then The Frontline, both dedicated to the national obsession. Let’s hope the programmes are informative and advance the debate people across the country are having about property and its role in the Irish economy, now and into the future. Let’s also hope against hope that those debates are evidence-based. In that spirit, a nice piece of accessible research on the duration of housing cycles has just come out from Phillipe Bracke at the IMF. Bracke surveys 19 countries, including Ireland, and finds that:

On average, upturns are longer than downturns, but the difference disappears once the last house price boom is excluded. In terms of length distribution, upturns (but not downturns) are more likely to end as their duration increases. This duration dependence is consistent with a boom-bust view of house price dynamics, where booms represent departures from fundamentals that are increasingly difficult to sustain.

Table 2 on page 9 of Bracke’s study is also very interesting. His analysis squares with the findings of Edward Leamer for the US economy, and those of Morgan Kelly in his 2007 Quarterly Economic Commentary piece on the likely extent of price falls in the housing market, and in his subsequent work on the Irish Credit Bubble.

Update: Here’s the iPlayer link to Property Crash.

In this article, Wolfgang Munchau addresses one of the key debates in the reconstruction of the euro system - whether banking union (with only a limited degree of fiscal union) is sufficient for a viable monetary union.

The Department of Finance shows its online skills with this Prezi presentation.

Before the public policy event, there will also be a IIIS research workshop on October 25th from 12-3 in the IIIS seminar room, with presentations by

• Mike Dooley, TBA
• Alan Ahearne and Guntram Wolff, “The Debt Challenge in Europe”
• Kristin Forbes and Frank Warnock, “Capital Flow Waves: Surges, Stops, Flight and Retrenchment“
• Philip R. Lane and Gian Maria Milesi-Ferretti, “External Adjustment and the Global Crisis”
  

On Tuesday October 25th, Trinity College Dublin will host a public roundtable on the European Debt Crisis, as part of the Policy Institute’s 2011-2012 Henry Grattan Lecture Series.  Co-hosted by the IIIS, this will feature some very good international experts:

• Mike Dooley (UC Santa Cruz)
• Peter Boone (LSE)
• Jean Pisani-Ferry (Bruegel)
• Ciaran O’Hagan (Societe Generale)

This event will take place 4pm-5.45pm.  The event is free - all welcome.  Please let Helen Murray at Policy Institute know if you plan to come along (policy.institute at tcd.ie).

More details are available here.