In its latest European Weekly Analyst issue, the Goldman Sachs team run the numbers on possible bank losses in Ireland (the central scenario has NAMA being too pessimistic about likely losses). In addition, they provide a useful Q&A on the bailout talks. You can download it here.
Author: Philip Lane
In Irish Economy Note No.12, Greg Connor and Brian O’Kelly consider the costs of lax regulation during 2003-2008
Abstract: This paper develops a restrictive procedure for evaluating economic policy decisions, by comparing actual economic history to a simulated history where a specific policy decision is replaced with a counterfactual, but credible, alternative. Our procedure is theoretically straightforward, but empirically problematic since it requires the identification of a feasible policy alternative and a model linking a specific policy choice to subsequent economic outcomes. We apply the procedure to the mistaken decision to maintain an excessively lax financial regulation regime in Ireland during the period 2003 – 2008. We measure the differences in banking sector stability and national income that would have occurred if the stricter regulatory regime imposed in Ireland in 2009 had been put in place six years earlier. We find that a few simple, reasonably prudent regulatory controls on the Irish banking sector would have greatly limited the vulnerability of the domestic sector to the 2008 global credit freeze, and almost certainly prevented the 2008-2009 collapse of the domestic banking sector and the consequent deep Irish recession of 2009-2010. On the other hand, the risky and unsustainable inflow of foreign capital mediated by the domestic banks accounts for a substantial part of Irish economic growth during the 2003-2007 period. Without this net
foreign borrowing inflow, cumulative gross domestic product over the early period would have been substantially lower.
Next week sees a lot of activity on the seminar front.
1. Tuesday November 23
Economics and Psychology One Day Session: UCD Geary Institute
We will be hosting a session on Economics and Psychology in the UCD Research Building on November 23rd. Those who wish to attend should RSVP to Philippa Barrington at geary@ucd.ie. Please indicate whether you wish to attend the full-day session or the keynote lecture by Professor Laibson only. There is no registration fee.
Includes 4pm – 5.30pm: Keynote Speaker.
David Laibson (Harvard) “Natural Expectations and Economic Behavior”
More details here.
2. Thursday November 25
The second Geary Lecture of 2010 will be given by Professor Canice Prendergast, W. Allen Wallis Professor of Economics at the University of Chicago Booth School of Business.
Venue: ESRI, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2
Date: 25/11/2010
Time: 4 p.m.
For the last couple of decades, there has been a large body of work arguing for the widespread use of pay-for-performance as the appropriate means of aligning the interests of workers with those of their employers. This lecture outlines recent contributions to this body of work, and focuses on a number of general themes. First, the successes of pay-for-performance schemes are limited to a small class of agency settings that do not seem to generalise to other settings. Second, the literature has now begun to consider instruments other than pay as the most natural way to align interests. Finally, there is controversial literature in psychology that now challenges the basic assumptions of this strand of economic literature. The talk will review all these recent contributions, and likely directions for future research.
Canice Prendergast, who was a research assistant at the ESRI from 1983 to 1985, is now one of the world’s foremost researchers on workplace incentives and their impact on productivity. He is currently the W. Allen Wallis Professor of Economics at the University of Chicago Booth School of Business.
The Geary lecture is organised each year by the ESRI and honours Dr R. C. Geary (1896 –1983), the first Director of the Institute.
This is one of the special events being held during 2010 to mark the Institute’s fiftieth birthday.
Booking
Attendance at the event is free but must be pre-booked. There are a limited number of places available and early booking is encouraged. To book a place, please send details of attendee’s name, organisation and contact telephone number by email to admin@esri.ie.
3. Friday November 26
Canice Prendergast will also give an academic seminar at 1pm on Friday 26 November in the ESRI seminar room.
Contracts and Conflict in Organizations
Abstract:
In many organizations, the way that incentive problems are alleviated is not via contracts, but rather who is hired. This paper offers a theory of targeted hiring, and how its role changes as contracting becomes poorer.
It is helpful to know what the IMF’s current view of the role of conditionality in its programmes: the statement is here.
Additional material:
The Independent Evaluation Office provides critiques of various aspects of IMF work:
There is a query page to see who borrowed what and when from IMF:
In his recent Richard H. Sabot Lecture, Ken Rogoff addresses the question of whether the IMF is guilty of imposing excessive austerity as part of a bailout. The paper is here. A summary quote:
I will argue that the simplest and perhaps most cutting version of the IMF austerity charges is simply confused. IMF loans typically relieve austerity; they do not make it worse. IMF support helps a country engage in less procyclical budget contraction than it might have been forced to do otherwise. That said, the IMF’s judgments in calibrating programs involve a huge range of subjective decisions about politics, psychology, and economics, judgments that are difficult to get “right” consistently. Toward the end of my remarks, I will argue that in many respects, the greatest problem with IMF programs is not excessive austerity with debtors but excessive generosity toward creditors.