A new working paper from Niall Conroy and Eddie Casey of the Fiscal Council Secretariat.
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.
For more than 30 years, Economic Policy has been publishing papers on pressing European policy issues. Preliminary versions of the papers are first discussed at Panel meetings. The 65th Panel meeting, which starts today in Valletta, features papers on the causes of Brexit, on the consequences of Brexit, on the impact of the 2015 reforms on the Italian labour market, on innovation, on entrepreneurship, on retirement, on monetary policy, and on mobile communications. The papers are available here.
Speeches start at 1pm; as is now traditional, the whole thing has essentially been leaked to the papers, see here and here for representative samples, there’s also a live stream with the relevant documentation beside it.
Comment moderation is off to simulate the ‘live blog’ thing I still can’t quite get right on this site.
One of the really interesting outcomes of the last election was the rejection by voters of the Fine Gael strap line: let’s keep the recovery going. As measured by GDP growth, Ireland was rebounding from its period of austerity very strongly, with the fastest GDP growth in Europe.
A household sector which had just received an income tax cut, child benefit increases, pension increases, social welfare increases, public sector pay increases (or restorations, whatever), threw the main party’s ‘recovery’ line back in its face at the doorsteps–what recovery, they asked. No recovery here.
This was taken to mean that there was no recovery outside of Dublin. Dan O’Brien’s series of columns have dispelled that myth. There is a recovery in rural Ireland, it’s just not happening as quickly as in the capital, where employment levels are now 96% of their 2008 peak. In the Mid-West employment levels are at 88% of their peak.
Then a long and rambling discussion on the corporate tax element of Ireland’s apparent rebound took place, largely on twitter. The volatility of the corporate tax take in Ireland is exceptional.
Jordà, Schularick and Taylor have produced a must-read paper, summarising the results of a decade-long research effort to create a long-run macro-financial data set for 17 countries. The paper is here (.pdf) and they provide some new stylized facts they document should “prove fertile ground for the development of a newer generation of macroeconomic models with a prominent role for financial factors”.
In particular, they document a ‘hockey-stick’ effect of private sector creditto GDP for a range of economies, and one of the hockey sticks can be seen in the figure below. After about 1950, for most of the elements the authors study, finance and leverage takes a more and more central role in the development of modern economies.