By Philip LaneFriday, August 28th, 2015
IFAC have a new analytical note on this topic: here.
By Philip LaneFriday, August 28th, 2015
IFAC have a new analytical note on this topic: here.
There is a brief article in Bloomberg Business today about the search for a new Irish Central Bank governor.
“Ireland is about to deliver evidence on whether, nearly two years after regaining its economic sovereignty, much has really changed. …… Noonan’s dilemma now is whether to move back to the pre-crisis mode of finding a governor from inside the civil service, or repeat the Honohan recipe and appoint another outsider.”
The Paddy Power betting odds are discussed. As a financial economist, I am forbidden by the Efficient Market Theory from making gambling bets, but perhaps some of the labour/macro economists might want to take a punt.
I had an earlier post on the strategic issues around this appointment. The recent China-related volatility in financial markets is the latest difficult policy problem confronting monetary authorities in Europe and globally. Ireland should appoint someone as governor who can serve both domestically and also contribute to ECB council deliberations.
Since some readers will know some of the people mentioned personally, I blocked the comments feature.
By Philip LaneTuesday, August 25th, 2015
By Philip LaneTuesday, August 18th, 2015
Derek Scally writes here.
By Liam DelaneySunday, August 9th, 2015
The election of the majority Conservative government in May meant that a referendum to decide whether Britain remains part of the EU became inevitable. A commitment to an “in-out” referendum on EU membership was provided in the May Queen’s Speech and it will likely go ahead in 2016 (or 2017 at the latest). Opinion polls show a split electorate. Risk aversion and other status quo factors should work in favour of the “stay” side. Bookies odds reflect this with at least one popular bookmaker placing the odds of a “leave” result at 3-1. In any case while the likeliest outcome at present is that Britain will remain in the EU, it is still a strong possibility they will leave and worth discussing in terms of implications for Britain and other countries. Germane to the title of this blog the implications for the Irish economy broadly are worth discussing.
In the draft national risk assessment published by the Taoiseach’s office earlier this year, Brexit is mentioned as follows:
“Following the general election in May, the British Government is likely to make proposals both on how the functioning of the EU could be improved and on how specific UK concerns about EU membership could be addressed, with the possibility of a UK referendum on EU membership. A fundamental change to the role of the UK in the EU, or a period of continuing uncertainty regarding the UK’s relationship with the EU, could present significant challenges for the EU as a whole and for Ireland in particular, especially in terms of (i) pursuit of Ireland’s objectives as a Member State as the UK is an important ally within the EU on negotiations on issues of mutual concern such as trade and the deepening of the single market; 24 (ii) bilateral relations with the UK, including the significant economic and trading relationship; and (iii) the impact on Northern Ireland issues and North/South relations.”
A number of questions come to mind in the prospect of Britain leaving the EU. I raise these purely for discussion and they are not ordered by any degree of likelihood or priority. In the event of a “leave” vote a number of alternative configurations might result including various forms of trade deal with the UK and EU members. (See here for one attempt to answer some of the economic questions below; Davy’s also released a piece on economic effects; NTMA piece on economic effects here; Alan Matthews on the implications for Irish agri-food).
a) What are the implications for border arrangements between Northern Ireland and the Republic of Ireland?
b) What are the implications for the status of UK citizens living in the Republic Ireland?
c) What are the implications for Irish citizens living in the United Kingdom?
d) Will the uncertainty surrounding the referendum affect currency volatility?
e) How will the uncertainty surrounding the referendum impact on FDI into Ireland? Does the prospect of a Brexit make Ireland a safer destination for some types of companies relative to the UK? In a “leave” scenario would Ireland be more attractive a destination than the UK for non-EU companies looking for access to the EU market?
f) How would a Brexit influence trade between Ireland and the rest of the EU?
g) What implications would Brexit have for the Scottish political situation and potential knock-on effects to the Irish economy?
h) What implications would it have for support for the EU in Ireland?
i) How would a “leave” result influence the Northern Irish economy?
j) Would a “leave” result limit mobility of Irish people to the UK?
k) What implications would a “leave” result have for wider political movements in Europe?
The small amount of publicly available analysis so far suggests the answer to most of the economic questions is that it would have a negative impact on the Irish economy largely coming through trade disruption. But it seems clear there is a lot of uncertainty in what a leave scenario would look like. As reported widely in the media there are now various groups in Ireland looking at these questions including in various state agencies and the Central Bank. It will be interesting to see this debate unfold.
By Philip LaneTuesday, August 4th, 2015
I provide a brief discussion of the recent Five Presidents’ Report in this IT article – here.
By Philip LaneSunday, August 2nd, 2015
By Liam DelaneyMonday, July 27th, 2015
I posted earlier in the year on Cormac O’Grada’s recently published book on famines. He has also recently released, among several other works, a working paper on the history of Irish famines since 1300. A version is available here and provides a chronology and history of several Irish famines pre-dating the 1840s.
The Dublin Economics Workshop will hold its annual economic policy conference at the Hodson Bay Hotel in Athlone October 16th and 17th next. Proposals in any area of economic policy are invited and should be forwarded, ideally before September 4th, to both of the following: firstname.lastname@example.org and email@example.com.
Programme and booking details will be circulated in due course. The Dublin Economics Workshop is kindly sponsored by Dublin Chamber of Commerce.
By Frank BarryTuesday, July 21st, 2015
Colm McCarthy and I were up in front of the Oireachtas Finance Committee last week to talk about Greece. I attach my speaking notes. (Colm’s were essentially as published in the Sunday Independent the other day). I think it’s fair to say that we both kicked to touch on Pat Rabbitte’s question as to what politically acceptable solution could have been pulled out of the hat. This is a question for the diplomats and politicians rather than economists. The radicals and the establishment parties across Europe had manoeuvered each other so that they ended up painted not so much into a corner as up against an open 10th floor window. Someone was going to be defenestrated. And it was never going to be the strong.
By Liam DelaneySunday, July 19th, 2015
Kevin Denny and I are organising a half-day workshop to look at Changes in Well-being in Ireland over the last 10 to 15 years. Obviously this has been an eventful time in Ireland and we think it would be very useful at this stage to draw together what is known about the Irish case. Our specific aim is to consider a wide range of possible outcomes including physical and mental health as well as subjective well-being. Moreover we want to draw on a range of approaches from epidemiology, psychological medicine and the social sciences as well as different types of data. Our intention is to have around 7 presentations with plenty of time for discussion. The event will be held in the UCD Geary Institute on Tuesday November 17th from 12pm to 4pm. A light lunch would be provided. Further details of the talks and how to register will be provided here in due course. Suggestions on the programme still welcome.
By Liam DelaneyWednesday, July 15th, 2015
Since 2008 a number of us have organised an annual conference for people working at the interface of economics, psychology and related areas. Speakers have included international thought-leaders in this area including David Laibson, David Halpern, Robert Sugden, Arie Kapteyn, Ruth Byrne and John O’Doherty as well a diverse range of speakers from across economics, psychology and policy in Ireland and they have contributed to maintaining an active discussion of the potential for this area in Ireland. The next one will take place at the ESRI in Dublin on November 27th. At the previous session we agreed to organise some more adhoc meet-ups in between the events partly to disseminate new ideas and also with a view to establishing a more structured network in this area in Ireland. The first of these meetings takes place in Dublin on July 22nd organised by myself and Sean Gill. It will take place at 7pm sharp at the Roasted Brown coffee shop in Temple Bar. There will be 5 short presentations (to be listed here in the next couple of days) and some discussion about future events. Meet-ups around this area are now taking place in several cities including London and Sydney. I spoke at the Sydney event recently and it was extremely lively and led to several useful follow-ups. There are many people interested in this broad area in Dublin and Ireland more generally. This is intended to a broad forum and we welcome attendance and contribution from academics interested in exchanging ideas with a broad audience, people across different areas including students and people with business and policy interests in this area. For now we envisage the events being structured around short talks where a speaker describes briefly an idea they are working on or thinking about and potentially some suggestions for collaboration. Though there are many other event formats that could be considered. If you are attending please drop me an email at firstname.lastname@example.org
Liam Delaney: Overview of behavioural economics, policy and business.
Michael Daly: Psychology, Self-Control and Policy
Sean Gill: Behavioural Economics and Health
Pete Lunn: Behavioural Economics and Regulation
Q+A and Suggestions for Development of Network
By Philip LaneTuesday, July 14th, 2015
The NBER organised a panel on the Greek crisis last week – video here.
By Ronan LyonsFriday, July 10th, 2015
The site’s readership might be interested in two announcements by the Statistical & Social Inquiry Society of Ireland:
Paul Krugman has a thoughtful op-ed piece in today’s New York Times in which he reluctantly calls for Greek exit from the euro. I share his view on the desirability of Grexit at this juncture, but not his reluctance in expressing that opinion. How could Grexit best be designed, for Greece, for Europe, and for international interests? Below are a few modest thoughts on this. (more…)
By Alan AhearneSaturday, July 4th, 2015
Today’s Irish Times carries my views on the immense damage that the Syriza-led government has done to the Greek economy in a short space of time. Link is here.
By Philip LaneFriday, July 3rd, 2015
New article by Paul Corcoran, Eve Griffin, Ella Arensman, Anthony P Fitzgerald and Ivan J Perry - here.
By Philip LaneFriday, July 3rd, 2015
The Bank of Lithuania is hosting a conference on this topic today – materials here (including a presentation by Mark Cassidy of Central Bank of Ireland).
By Philip LaneFriday, July 3rd, 2015
|Network Social Capital and Labour Market Outcomes: Evidence For Ireland|
|Spillover in Euro Area Sovereign Bond Markets|
|Thomas Conefrey, David Cronin||197–231|
|A Formal Investigation of Inequalities in Health Behaviours After Age 50 on the Island of Ireland|
|Eibhlín Hudson, David Madden, Irene Mosca||233–265|
|Is Fuel Poverty in Ireland a Distinct Type of Deprivation?|
|Dorothy Watson, Bertrand Maitre||267–291|
|Deciphering Ireland’s Macroeconomic Imbalance Indicators: Statistical Considerations|
|Policy and Economic Change in the Agri-Food Sector in Ireland|
|Cathal O’Donoghue, Thia Hennessy||315–337|
By Philip LaneFriday, July 3rd, 2015
If an extend-and-pretend deal is done it will be the third Greek ‘rescue’. Without debt relief it will also be the third to break the IMF rule, adopted after the Argentina failure in 2001, to avoid financing countries with unsustainable debts.
In early 2010 the debt/GDP ratio in Greece was predicted at 115% (it turned out to be 130%), the deficit in double digits and GDP sinking fast. The Fund rewrote its rule-book to get involved in the Troika despite the unwillingness of IMF staff to sign off on debt sustainability. See the account from the CIGI think-tank
The 2012 deal repeated the procedure, this time with haircuts of private creditors.
The Greek economy is again contracting, the budget headed back into serious deficit, the debt ratio headed for 180%. Even with low interest rates and long duration of official debts, no sustainability analysis is likely to look healthy. The bond market, to which Greece must return, agrees.
The IMF cannot credibly repeat the routine of 2010 and 2012 – it does have non-European members after all, and its exposure to Europe is already unacceptable to them. Lagarde, as French Finance minister, opposed Greek debt restructuring in 2010 but there is no guarantee that the IMF board will participate again without haircuts, this time for its European ex-partners. The week could see no deal with Grexit, or Trexit, the end of the Troika.
By Frank BarryFriday, June 26th, 2015
Adele Bergin of the ESRI and I made a presentation to a mini-symposium on Austerity: the Irish Experience at UCD last week. Our analysis points out how wrongheaded it is to suggest, as some have done over the last few days, that if only the Greeks would take their medicine the way we did they might be able to expect an equivalent recovery. This ignores the huge structural differences between the two economies.
Faced with evaporation of the tax base, jittery markets and a need for concessionary funding, our current government and the previous one did what was required on the fiscal side. In the language of economics textbooks however, consolidation was necessary but not sufficient for the timing and pace of the recovery.
The first structural difference is the vastly greater openness of the Irish economy. This cushions the domestic economy to an extent, since imports bear some of the brunt of consolidation.
Irish exports, though they took a hit in the early days of the international crisis, nevertheless propped up the economy in a way that the Greek export sector cannot do, because of the share of exports in the Irish economy, the sectoral pattern of our exports and our portfolio of export destinations.
The fact that Ireland was hugely specialised in goods and services for which international demand remained buoyant massively bolstered the economy. Pharmaceuticals dominate Irish merchandise exports: pharma increased as a share of total US, UK and eurozone imports from 2000 to date (as shown by Stephen Byrne and Martin O’Brien in the Central Bank of Ireland Quarterly Bulletin, 02, April 2015). Computer and information services dominate Irish services exports: these increased as a share of total US, UK and eurozone imports from 2000 to date. Agriculture and food dominate indigenous exports: these increased as a share of total US, UK and eurozone imports from 2000 to date.
Services comprise an unusually high share of Irish exports. Since transmission is almost costless, these are less geographically constrained and substantially less dependent on EU and North American markets than is the case for merchandise exports. In the case of the latter, the MNCs can shift export destinations much more easily than indigenous enterprises can, as reflected in an increased US share as the US recovered earlier from the global crisis. And Ireland of course benefitted much more than other eurozone economies from the weakening of the euro against the dollar and sterling over recent years.
Jobs in export production began to recover rapidly from 2009, driven by labour-intensive indigenous manufacturing exports and by the growth of both indigenous and foreign-affiliate services exports. Ireland’s export-led recovery then fed into domestic demand.
It would be impossible for Greece to replicate this pattern.
And by way of footnote: Even though it’s true that most Irish exports are produced by the foreign-owned multinational (MNC) sector, and that any €1 million of these exports creates less domestic value-added than €1 million of indigenous exports, a different perspective emerges when you look at backward linkages per job. These are particularly impressive in the case of the rapidly growing MNC-services sector.
By Philip LaneMonday, June 22nd, 2015
A serious question we do need to answer: are bank runs, or the potential for bank runs, becoming the ultimate backstop in a currency union comprised of creditor and debtor nations?
In the end the Oireachtas banking inquiry is unearthing the powerful narrative threat of the ‘ATMs running dry’ as driving much of the decision to deliver the 2008 guarantee, Cyprus had a bank run precipitate its crisis, at least partially. Iceland had the same experience, and we all know what is happening to Greek deposits right now, ELA or not.
Dr William Behan, co-author of “Does Eliminating Fees at Point of Access Affect Irish General Practice Attendance Rates in the Under 6 Years Old Population? A Cross Sectional Study at Six General Practices”
Most of the state sponsored; CSO or university department generated statistics on general practice utilisation since 2001 have been based on surveys employing 1 year recollection. Dr. Denny uses Growing Up in Ireland (GUI) the largest database available for the purpose of determining the marginal effect of granting private under 6s patients medical cards. Intuitively this makes sense……or does it when the potential biases of that particular survey data are explored?
We really have to examine biases in statistics collection to determine what is more likely.
(This is a guest post by Dr Kevin Denny of the School of Economics & Geary Institute, UCD).
The extension of free GP care to under 6’s has raised the issue of what the effect will be on GPs’ practices. Understandably they are concerned about the increased demand on a sector that appears to be under strain. I am not aware of any specific research for this age group (mea culpa if I have missed it).
There are several studies for the general populations (various convex combinations of Anne Nolan, Brian Nolan & David Madden). I heard a very interesting recent interview on TodayFM with a GP Ciara Kelly. In the course of this, she said that children with medical cards visit a doctor 6 times a year while those without visited twice. From this she inferred that the new scheme would triple the demand of those currently without free care.A GP that I was once on a radio panel with said something very similar. I don’t know the origins of these numbers. However the average difference between the two groups is not relevant here: you need to know the marginal effect. Children currently without medical cards are different from those with: on average they are, inter alia, healthier and wealthier.
Estimates from other countries are not informative. I searched in vain for a government document that discussed this. We now have very good data in the form of the Growing Up in Ireland study. Here I report some estimates of what the effect of the reform might be. I use the second wave of the infant cohort – the three year olds who should be reasonably representative of the 0-5 age range. As dependent variable I use the question on “Number of times seen or talked with a general practitioner in the last 12 months”. This is top-coded at 20 but there are very few in that category. The variable of interest is whether they are covered by a medical card. I combine GP-only and the full medical card for simplicity.
I have a long list of controls which covers the usual suspects. They include health of the child and mother, income, education and other demographics. I also have a variable that indicated whether their GP visits are covered by private health insurance. Changes to the controls do not make much difference.
There are numerous ways of estimating such models and I used three. For the cognoscenti these are poisson & neg-bin2 regressions and a finite mixture of poissons. The marginal effects are very similar as is often the case. Before we consider those, what is the average difference in the data? In the GUI the population weighted mean of doctor visits for children covered and not-covered by medical cards is: 3.13 and 2.18 respectively. This is very different from the 6 and 2 mentioned above, the source of which I don’t know.
The marginal effects for the different models vary between 0.632 and 0.713, less than the average difference (as you would expect) and a lot less than the difference of 4 mentioned above. For simplicity I will take 0.68 as a ballpark value. So giving free GP care for under 6’s should increase the number of GP visits per child by less than one per annum. We are assuming homogenous effects: you could generalize this to allow the effects differ in various ways. The marginal effect of having private insurance is about 0.34. Since these are probably the better-off of non-medical card holders, this suggests that 0.68 is on the high side i.e. the effect on the kids of the rich of free GP care is probably lower, if anything.
I also estimated the model using the child cohort (the 9 year olds) for whom the marginal effect is about 0.33 incidentally. Estimates for adults tend to be in the 1-2 visits per annum range. So what might this mean in practice? The maximum number of children who could be covered by the present reform is about 270,000. Multiply by 0.68 & this suggests an extra ~183,600 GP visits a year. There are around 2,500 GPs in Ireland so this is about 73.5 visits a year each. If they work on average 47 weeks a year this would mean about 1.56 extra visits a week from the under-6’s for a GP. It would be interesting to know how much of a GP’s time this is likely to require.
The mean is not the only parameter in town. For doctors whose patients are already covered there will be little or no difference. Doctors in more affluent areas will likely bear the brunt. Doubtless there are additional complications.
For example, not all GP’s will sign up. I am ignoring general equilibrium effects, such as any ensuing change in the number of GPs. Perhaps the main known unknown is the labour supply responses of GPs to a switch from a per-visit fee to a capitation grant which encourages them to take on patients but spend as little time as possible with them. Extrapolation is difficult, especially about the unknown.
I don’t mean to suggest that my estimates are best, I can’t explore every possibility in a blog post. I think they are credible though. Readers may have better knowledge of some of these parameters.
A file with the full results is available at http://tinyurl.com/p9cu8ax
The Demographic Transition, which started in Europe in the late 18th century, had a huge positive impact on average human welfare. Population levels and growth rates became dependent upon societal preferences rather than upon famine and disease. The demographic transition has now spread around the world to all continents, except Africa. Surprisingly, Africa has not made the switch. Rather than seeing population growth easing and then stopping, in a typical post-demographic transition pattern, African population growth rates have stayed at a very high rate for many decades. Even in recent years, while many demographers expected a slowdown finally to take hold, African population levels have rocketed up. So for example, from the National Geographic: (more…)
By Frank BarryTuesday, June 9th, 2015
In a week when the Irish Times carried reports complaining about the dumbing down of Leaving Cert maths the paper itself provided us with some beauties. An article yesterday by a former head of the School of Education at UCD informs us that “nine per cent of academics at professor level were male and 2 per cent were female”. What about the other 89 (or 77 or 61 or whatever it is)?
Last Saturday’s paper carried a report on ESRI work on overqualified workers. The author revealed himself to hold a masters degree from UCD. The piece (clearly not quoting directly from the ESRI) tells us that “adults whose highest educational attainment is the Leaving Cert earn 31 per cent less on average than those with a higher certificate or ordinary degree, and 100 per cent less than graduates with an honours degree”. I’m sure we all sympathise with how tough it must be to make ends meet on the latter salary.
Even some of their commentators on economics seem to think that a 200 per cent increase means that the thing has doubled. But it could be worse: imagine a 200 per cent decrease.
FIFA, the governing body of world football, has been a byword for corruption for decades, stretching back to the presidency of Sepp Blatter’s predecessor, the Brazilian Joao Havelange, when Blatter was number two in the organisation. Under the Havelange presidency millions of dollars went walkabout in murky transactions between FIFA and a company which marketed its TV rights. More recently the World Cup of 2022 was awarded to oil-rich Qatar, to be played in high Summer in temperatures of 40 degrees Centigrade. The Sunday Times has documented wholesale vote-buying on behalf of Qatar. US Attorney General Loretta Lynch has made it clear that the FBI investigations, which have yielded criminal indictments against FIFA officials, cover offences stretching back to 1991.
Sepp Blatter has been a senior FIFA official for forty years and president since 1998. How can his serial re-elections be explained, the most recent two weeks ago after the announcement of FBI action? FIFA is a most unusual organisation and its governance and economic structures make corruption almost inevitable.
Governance: Every national association, in even the tiniest country, has one vote in FIFA elections. Some tiny palm-fringed idyll in the South Pacific, where soccer was unheard of until recently, can form a football association and expect instant recognition from FIFA. It will then have one vote at FIFA congresses, same as Germany and Brazil, the regular world champions. FIFA has 209 members. There are not 209 countries in the world (the United Nations has just 193 members, for example). ‘Countries’ such as Andorra, San Marino, the Faroe Islands and numerous others are FIFA members. The smallest member in population terms is Montserrat, home to 5000 souls. These ‘countries’ are not regarded as eligible for membership in any serious international organisation, since they are not fully-fledged states but remnants of the Dutch, British and French empires. FIFA member Liechtenstein is a remnant of the Holy Roman Empire. It is not difficult, or costly in the overall scheme of things, to re-distribute rents to these minnows to ensure their loyalty. This is the first part of the explanation for Blatter’s repeated majorities.
Economics: The second part is the simple fact that FIFA has had, for the last four decades, quite a lot of rents to dish out. Without economic rent there is no pot of graft. The rent source is a monopoly, the World Cup: it has become, through TV rights and sponsorship, a huge money-spinner. The players, who tend to take the lion’s share of the earnings available in all other major sports, get paid very little for national team appearances. If they wish to play international football at all, they have little bargaining power. Once committed to a national team, usually the country of their birth, they cannot threaten to desert to someone who pays better. If they could, Saudi Arabia would win the World Cup. Most professional football clubs do not make profits: the players, and their industrious agents, make sure that most of the revenues flow through to the performers, which is what happens in every other branch of the entertainment business. In football the World Cup revenues flow to FIFA, an opaque and unaccountable organisation whose leadership is free to perpetuate itself through buying the small national associations around the world. These national bodies in turn have weak, or no, corporate governance. With one brave bound, the money is free.
It is the combination of equal votes for all with billions of unearned revenue dished out behind the curtain which has created the FIFA monster. This is corruption by design.
Some commentators wrongly claim there is little value in the long and (moderately) expensive banking inquiry. There is much to learn from the inquiry. One important message can be gleaned from the testimony of Central Bank and Financial Regulator executives this past two weeks: the coalition needs to appoint a first-rate economist (like Honohan) as his successor as central bank governor. The coalition should scour the globe and not compromise on analytical firepower.
Brian Lenihan pushed through the appointment of Honohan against the tradition of promoting someone from the senior ranks of the civil service. If the tradition had been followed, the Irish economy might still be wallowing in financial instability. A central bank governor without first-rate economic expertise could have made a total hash of the financial restructuring and recovery programme of the last five years. For example, a former senior civil servant would not have made the phone call to RTE Morning Ireland in November, 2010, getting the Troika programme quickly started. Other painful actions taken in recent years, such as the PCAR and PLAR exercises, and the time-consuming and expensive improvements to the financial sector database, might have never started or been botched. The job requires a highly-competent, well-trained and experienced economist. (more…)