Following a recommendation from some colleagues who lived through the last fiscal crisis, I went looking for this. Thankfully, someone has placed a classic address from the Minister on Youtube.
Category: Fiscal Policy
I hadn’t seen anyone else on the blog link to this CSO publication from last week on cross-border shopping (based on a special module of the QNHS for 2009:Q2) which was brought to my attention yesterday. The results are interesting and the microdata associated with the module could be used for a nice research project.
Based on a quick read, the survey results suggest that the cross-border shopping issue has been substantially over-hyped by the media. A couple of highlights:
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Based on the estimates in the survey, total household expenditure on shopping in Northern Ireland between 2008:Q2 and 2009:Q2 was €435 million. This figure seems low relative to others that have been reported—for example, here.
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Outside of the border region, there are only very modest levels of cross-border shopping with average numbers of shopping trips less than or equal to one per year for all other regions. There is almost no cross-border shopping in the Mid-West, South-West and South-East regions.
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The average amount spent on alcohol per shopping trip was €32.
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Only 9 percent of respondents reported that they had shopped more in the North during the year up to 2009:Q2, while 1 percent reported that they had shopped less.
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Seven percent of respondents reported that they intended to shop regularly in the North in the coming twelve months.
The FT has a provocative editorial on Ireland in today’s edition. While making some valid points, it continues to treat Ireland as an ultra-open freak to which completely different rules apply. I think it would be news to most Irish businesses that “domestic demand is unimportant.”
One of the things that Philip has been emphasising since the start of the year is that if wages are cut to the point where workers feel confident that they won’t be cut further, they will then start spending again. On the other hand, workers who fear their wages will be cut in the future will, quite rationally, save for the rainy days ahead. The worst of all possible worlds, from the point of maintaining domestic consumption, would be a situation where wages fell, predictably, in slow motion, over a number of years.
So it is a matter of concern to read articles like this.
A further note: public sector wage cuts are required to reduce the possibility of a ‘sudden stop’ in lending to the Irish government. Private sector wage and price cuts are required to prevent unemployment from rising further: Ireland is still an unacceptably expensive place in which to live and do business. It is a matter of deep regret that these are not happening in an across the board manner, and that wages in significant sectors of the economy have actually been rising. Allowing the focus to be on public sector wage reductions alone misses this essential point, and represents a serious political failure on the part of the government.
We are seeing just how difficult it is to achieve nominal wage and price reductions in a modern economy, and just how useful it is to have a currency to devalue. But we don’t have one, and can’t leave EMU. Given that wages are proving to be sticky, and that there is no central Eurozone fiscal authority to help maintain demand here, emigration is the most likely margin of adjustment for our economy in the short run. These are the constraints that we signed up for under Maastricht, as Neary and Thom pointed out in the 1990s, and it is too late to start complaining about it now.