Producing Short-Term Forecasts of the Irish Economy: A Suite of Models Approach.

A new working paper from Niall Conroy and Eddie Casey of the Fiscal Council Secretariat.

Abstract:

The Council’s mandate includes endorsing, as it considers appropriate, the official macroeconomic forecasts of the Department of Finance on which the annual Budget and Stability Programme Update are based. As part of the endorsement process and for the purposes of its ongoing monitoring and analysis of the Irish economy, the Council’s Secretariat produces its own Benchmark macroeconomic projections. This paper describes the short-run forecasting models used by the Secretariat for producing these projections. The general forecasting approach can be described as follows. Equations are used to forecast each component of the expenditure side of the Quarterly National Accounts. Multiple models are estimated for most components, with the simple model average used as an initial input into the formulation of the Benchmark projections. The out-of-sample forecasting performance of these models is assessed at each endorsement round. In addition to these model-based projections, other elements are considered. Discussions with the Council and other forecasting agencies help to guide any judgement that may be applied before arriving at the final Benchmark projections.

Fiscal Assessment Report

The latest Assessment Report of the Fiscal Council is available here.

The fatal flaw of the populist approach

The world is awash with populists. From Ireland’s independents to President Duterte of the Philippines, from Germany’s anti-immigrant AfD party to Norbert Hofer of the far-right Freedom Party of Austria, from Ukip and Jeremy Corbyn in Britain to Donald Trump in the US, populists are on the rise. And we’re not talking just a few random demagogues here, though personality does go a long way. (Trump-related Pulp Fiction pun intended, by the way.)

We are seeing a rise in populist parties getting and holding onto power in several European countries including Finland, Hungary, Latvia, Lithuania, Norway, Ireland and Switzerland. Iceland is about to elect the Pirate Party (no really) to power. The French Front National may well take power in France, riding a wave of anti-immigrant sentiment there.

Populists come from both sides of the political spectrum: Greece’s Syriza party and Spain’s Podemos party consider themselves of the left, while Germany’s AfD and France’s Front National are on the far right.

So it’s a problem. Old, established, centrist parties have lost their grip on power – spectacularly so in Greece – while newer parties are standing mostly on a basis of what they are not – Corbyn is not a Blairite, Marine Le Pen is not Nicolas Sarkozy, and so forth. The 32nd Dáil contains 19 TDs who are nominally ‘independent’, with 12 more in left or far-left groupings. Ireland does not produce far-right TDs that often, though it does produce some very right-wing policies from time to time.

Forecasting Corporation Tax Revenues

Here is an Analytical Note on the Challenges Forecasting Irish Corporation Tax from staff economists of the Fiscal Council.

Preliminary Census Results

The CSO have published some preliminary findings from last April’s Census.

The population was measured to be 4.76 million up from 4.59 million in 2011 giving an increase of 170,000 (+3.7%).  The natural increase was just over 198,000 so the estimate of net migration over the five years since the last census is –28,500.  This is the second consecutive occasion where inter-censal population estimates were out by around 100,000.

The housing stock increased from 2,003,914 to 2,022,895, a rise of less than 20,000 over the five years.  On census night just over 1.7 million units were occupied with 45,000 units where the occupants were temporarily absent and there were 60,000 unoccupied holiday or second homes.  There were just under 200,000 “other vacant dwellings” a drop of 30,000 in this category since 2011.  There is a wide variation in vacancy rates by area.

There is plenty of interesting detail available by following the link.