Signed Articles: New Research on Capacity Constraints in the Irish Economy and on the Euro Area Slowdown
Central Bank of Ireland

Signed Articles: New Research on Capacity Constraints in the Irish Economy and on the Euro Area Slowdown

July 30, 2019

The Central Bank of Ireland has published three signed articles from the third Quarterly Bulletin of 2019, due to be published on 31July 2019. Two examine the topic of capacity constraints in the Irish economy while the third looks in detail at the factors behind the recent euro area slowdown.

Ireland Economy
Ireland Economy

Modelling Overheating Risks in the Irish Economy‘, by Thomas Conefrey, Gerard O’Reilly, Graeme Walsh and Luca Zavalloni, explores overheating risks in the Irish economy using the Central Bank’s macroeconomic models.

The key findings are:

  • Rising wages in an upturn could lead to boom-bust dynamics if wages are not flexible downwards when the buoyant economic conditions dissipate.
  • Migration can play an important role in mitigating overheating dynamics in the labour market, while at the same time creating higher demand and additional pressures in other parts of the economy.
  • In the event of continued net inward migration and further expansion in construction activity, fiscal policy should be used to manage excess demand in the economy.

A second article, ‘Employment Growth: Where do we go from here?’ by Stephen Byrne and Tara McIndoe-Calder, examines the prospects for the Irish labour market and assesses the extent to which the economy can sustain employment growth in the short to medium term without generating wage and price pressures.

The key findings are:

  • Conditions in the domestic labour market are now consistent with full employment.
  • Decreases in unemployment and increased labour force participation will not be sufficient to support employment growth at current levels over the short to medium term.
  • Sustained increases in net inward migration will be needed in the coming years to ensure that growth will be not impeded by labour supply constraints.

A third article, ‘Euro Area Slowdown – a Country-Sector Analysis‘ by David Byrne and Conor Parle examines the economic slowdown observed in the second half of 2018 and the first half of 2019 and, using granular measures of output and the labour market, asks whether the slowdown is concentrated in a small number of sectors or regions, or is more broadly evident.

The key findings are:

  • There is evidence for a small, broad-based, weakening of growth rates across countries and sectors.
  • However, the dominant contribution to lower output growth comes from manufacturing in a small number of European countries, most notably Germany.
  • Growth in other sectors and countries, and in the labour market, remains relatively robust but faces a risk of weakness subsequently spilling over from the manufacturing sector.

Notes

  • The views expressed in these articles are not necessarily those held by the Central Bank of Ireland.

Login To MyTis Comment Or Register to MyTIS

Leave a Reply

avatar
  Subscribe  
Notify of

Newsletter

Register now to receive the latest news and information for global trading industry.

Latest Articles

Gil Shapira

Gil Shapira Appointed as eToro’s Chief Information Officer

Israel based online trading service provide eToro recently revealed in an announcement that the firm has created a new senior-level leadership role and hired a new executive. As per the …