The Central Bank has released a new Economics Letter on this topic – here.
For regular readers, the website now looks a little different, since the ESR is in the process of moving to a modern open access online submission system. This new system includes a searchable digital archive and other attractive features. See the webpage for more information.
New MOU here.
David provides his retrospective here.
My colleagues at the Fiscal Council, Sebastian Barnes and Diarmaid Smyth, have produced a new report detailing a comprehensive approach to the State’s balance sheet. The report is available here.
I just want to underline here the value of the type of comprehensive approach developed by Sebastian and Diarmaid for policy analysis. Policy analysis can often be distorted by taking an overly narrow view of the government accounts, and in particular focusing only on the General Government accounts. Some examples:
In banking-related discussions, focus is often on the need for new State-provided capital and the consequent implications for Gross Government Debt. But even if the new round of stress tests do not reveal the need for new capital, any newly revealed losses are real losses in terms of the net worth of the State. On the other hand, additional capital required to meet more ambitious capital adequacy ratios need not lead to a reduction in net worth.
In the discussion of “stimulus programmes”, attention is often on forms of financing that run down State financial assets or use “off-balance sheet” forms of financing. The latter are typically off-balance sheet only to the extent that the liabilities – actual and contingent – are outside of the General Government accounts. They are very much on a more comprehensively measured balance sheet for the State.
Finally, in the discussion of the benefits from the promissory notes transactions, most attention is given to the impact on the General Government deficit, including the roughly €1 billion reduction in the deficit for 2014 and 2015. This particular reduction is largely an accounting fiction that follows from the limitations of General Government accounting. It is the result of the high interest rate that was paid on PNs. Sebastian and Diarmaid’s analysis shows the irrelevance of this interest rate from a comprehensive balance-sheet perspective (see also this recent post by Seamus Coffey). However, they show that the transactions are likely to generate a significant net present value gain when account is taken of the effects on all the relevant entities on the comprehensive State balance sheet, although the size of that gain is uncertain and depends on such factors as the choice of discount rate and the future evolution of the risk premium on Irish debt.
I don’t normally post my indo columns here, but I think readers of this blog may be interested in this one. The column follows on from last week’s discussion on this blog about the leaving certificate economics exam and its problems, but focuses on trying to secure a constructive outcome if possible.
I think we have to recognise two sets of constraints here.
- Second level teachers have mixed ability classes and can’t do an undergraduate level of work in their classrooms. The objective of leaving certificate economics is not to produce economists per se but rather economically knowledgeable citizens who study this subject as one among many subjects. Teachers and textbook writers are constrained by the 44 year old syllabus, but have to do their best with what they’ve got. So teachers will be rightly annoyed when reading comments about how potentially damaging the current syllabus is in terms of economic understanding.
- Third level economics lecturers like Kevin, Aedin and others rightly point out the deficiencies in the current exam content and structure and feel they should have some input into what is taught and why. Both sides agree the syllabus as is is not fit for purpose.
The solution, at least it seems to me, is to take the 2005 revised economics syllabus and update it together in a forum like the business studies teachers’ association, and present that to the NCCA. If everyone was happy enough with it, I don’t see why it couldn’t be rolled out fairly quickly with some inservice training for teachers.
It’s one thing to criticise and point out flaws when they exist, and Kevin and Aedin in particular were right to do so. But if we actually profess to know something about this subject, I think we should have a go at helping teachers to fix those flaws, if we can.
Interesting speech by Ben Broadbent here.
The Bank of Italy has released a set of research papers on various dimensions of the euro crisis – here.
An expert group has written a report on the Danish experience during the financial crisis. English summary here.
Following up on the earlier thread on the reform of the output gap estimation method, this VOXEU article by Andres and Domenech is relevant – here.
The WSJ reported yesterday on two interesting developments:
- the adoption of a new approach to measure the output gap, which attributes more of the current downturn to cyclical factors – here
- the advocacy of pan-European banks as a way to mitigate regional crises – here
(see also its “Insider’s Travel Guide to Dublin here.)
Last week President Higgins delivered a lecture as part of the Ethics for All series in DCU. The text can be read here.
Olivier Blanchard and colleagues presented a paper on this topic at the Brookings Papers on Economic Activity Panel – here.
Ireland’s second quarter national accounts have just been released. Full details are here.
On a quarterly basis GDP was up 0.4% and GNP was down 0.4%. As Colm McCarthy is forever pointing out, our quarterly data are highly volatile and not too much should be read into a single set of figures. On an annual basis GDP was down by a little more than 1%, and GNP was essentially flat. Ireland is still bumping along the bottom. But, because of the mad way in which recessions are officially defined, the headlines this lunchtime are of Ireland “exiting recession”.
Seán Ó Riain’s post and links to the recent British Medical Journal article on suicide and unemployment call for an extended comment, although, as Brian Lucey points out, the topic was discussed in a recent post.
The estimates of the number of suicides attributable to the recession in the BMJ article are based on the trend in suicide rates over the eight years 2000 to 2007 pooled over 54 countries compared with the rates recorded in the years 2008, 2009, and 2010. The discrepancies between the actual and extrapolated rates were used to infer the impact of unemployment: The authors summarize their approach as follows:
To examine whether suicide rates rose more in countries with worse economic downturns, we used Spearman’s correlation coefficients to investigate the association between suicide rate ratios in 2009 and percentage point changes in unemployment rates between 2007 (the baseline year) and 2009 (unemployment rates (in %) in 2009 minus unemployment rates (in %) in 2007 across study countries.
As may be seen from Figure 1 the Irish suicide rate hardly changed between 2007 and 2010 – rising from 10.5 to 10.9 When deaths “due to external causes of undetermined intent” (a category generally viewed as referring predominantly to suicides) are included, the rate actually fell from 13.2 in 2007 to 12.7 in 2010. Looking beyond 2010, using preliminary data based on year of registration, both measures of suicide were stable in 2011 and 2012.
Taking a long-run perspective, the econometric evidence contained in Walsh and Walsh, 2011 shows that the Irish suicide rate has been only weakly correlated with the unemployment rate. Other factors seem to have been at work. For example, the suicide rate rose sharply during the period of falling unemployment in the second half of the 1990s, which coincided with a surge in per capita alcohol consumption. The suicide rate declined during the first half of the noughties – particularly among younger males – coinciding with the start of a steady decline in alcohol consumption.
The following Figure shows the suicide and unemployment rates since the 1960s and brings out the lack of correlation between them. In particular, the recent surge in unemployment seems to have had a surprisingly weak impact on the suicide rate.
While it might be claimed – as is done in the BMJ article – that had unemployment not risen, the suicide rate would have fallen below its present level, but extending the earlier econometric work down to 2012 suggests that the influence of the unemployment rate on suicides has remained relatively weak and confined to males aged 35-54. These age groups account for about 30% of all suicides. Suicide among males in other age groups and among females, which account for 70% of the total, do not appear to be significantly influenced by the unemployment rate.
We must be careful not to attribute too much of our current suicide problem to the downturn in the economy and / or the measures that have been taken to correct our fiscal imbalances.
The Irish Times reports on a British Medical Journal article regarding international suicide rates in 2009, compared to the expected rates based on suicides between 2000-2007.
The study is available here: http://www.bmj.com/content/347/bmj.f5239
Abstract below the fold:
Today’s Irish Independent has an article that looks at some issues Kevin Denny found from an analysis of the 2012 Higher Level Economics paper and the associated marking scheme.
Kevin has put up a post with links to his detailed comments.
FT oped here.
This article provides an interesting overview of some of the issues raised by “big data” research – here.
This article may be of interest to the readership – here.
Open thread on the five-year anniversaries of the second half of September 2008 (Lehman; AIG; Iceland; Ireland; …)
My colleague Tom Flavin and I are preparing a paper for the Dublin Economic Workshop on the financial characteristics of Irish Mortgage defaults. The analysis relies on a donation of anonymized data on mortgage arrears from Permanent TSB and we are grateful to them for their assistance. Tom will give a fuller account of our data analysis at the conference; this blog entry highlights some of the strong evidence for a very substantial proportion of strategic arrears in Irish mortgage arrears. Continue reading “Strategic Irish Mortgage Arrears: The Smoking Gun”