| ||Date||Title and Description
|29/07/2015||Data Gaps and Shadow Banking: Profiling Special Purpose Vehicles' Activities in Ireland
The role of shadow banking and securitisation has gained increasing national and international attention since the start of the global financial crisis in 2007. Ireland has a sizeable non-bank financial sector with a number of key components including money market funds (MMFs), investment funds (IFs) and other financial intermediaries (OFIs). This Article focuses on the activities of financial vehicle corporations (FVCs) and special purpose vehicles (SPVs) within the OFI sector. The main features of these vehicles and their linkages to the Irish and international economies are examined. The Article also discusses recent regulatory developments and potential financial stability issues arising from their activities. In order to address data gaps and to improve oversight of the SPV sector, the Central Bank of Ireland will extend quarterly reporting requirements to SPVs.
|29/07/2015||Labour Cost Adjustment during the Crisis: Firm-level Evidence
This paper introduces a new firm-level dataset, based on the results from a survey on the wage-setting practices of Irish firms in the second half of 2014. These survey results represent a useful resource for policy makers, allowing for firm-level analysis of the approach to the adjustment of labour demand and wages in the face of a large negative shock. A number of findings are worth highlighting in relation to these results: in terms of the labour cost cutting approach, firms relied upon both reductions in the quantity (employment and hours) and the price of labour (wages); employee numbers was the most widely used margin of adjustment, followed by wage cuts and hours. While the majority of Irish firms opted to freeze base wages, in the region of 60 per cent, there is strong evidence of downward wage flexibility, with almost one quarter of firms surveyed cutting wages. A comparison with previous findings in relation to Ireland and other euro area countries points to a dramatic increase in the incidence of wage freezes and wage cuts amongst Irish firms during the 2008-2013 period.
|29/07/2015||The Expanded Asset Purchase Programme - What, Why and How of Euro Area QE
This article explains the what, why and how of the ECB’s expanded asset purchase programme, commonly referred to as ‘Quantitative Easing’. The scope and scale of this purchase programme is unparalleled in the euro area and it is expected to have a large effect on the euro area economy. This article
discusses the details of the programme, the reasons it was introduced, and the various channels through which it is expected to affect the real economy.
|31/03/2015||Navigating Uncharted Waters: Analysis of Monetary Operations & Financial Market Developments
In 2014, monetary policy announcements by global central banks continued to be a driver of financial markets. Developments in the European periphery and across emerging markets also continued to be a focus for market participants but to a lesser extent than in previous years. In this article, we review 2014 and early 2015, examining the evolution of Eurosystem liquidity provision and the subsequent impact on excess liquidity. The article also analyses the main changes to the Eurosystem’s operational framework over this period, including the introduction of the Targeted Longer Term Refinancing Operations (TLTROs), the Asset Backed Securities Purchase Programme (ABSPP), the Covered Bond Purchase Programme (CBPP3), and the Public Sector Purchase Programme (PSPP). The article reports on the continued improvements in money markets over the review period. Finally, we examine the on-going improvement in the Irish sovereign’s access to debt markets before briefly analysing changes in TARGET2 balances over 2014.
|31/03/2015||New Insights from the Enhancements to Quarterly Financial Accounts
Throughout 2015 and 2016, the Quarterly Financial Accounts of Ireland (QFA) will be expanded to reflect enhanced user requirements, the changing economic environment and the implementation of the latest European System of National and Regional Accounts (ESA 2010) manual. The enhancements to the data will include the publication of whom-to-whom data for deposits and loans for the first time in end-April 2015. Other notable features of the enhancements to QFA include a change to the definition of non-financial corporations (NFCs) and the publication of NFCs trade credit liabilities, which is an important source of funding for NFCs. Further enhancements to the data will be made during 2016. This article analyses some of the insights which can be gained from the enhancements to the QFA data. It finds that since the financial crisis intensified in Q3 2008, there have been significant inflows into government deposit accounts by households and outflows from monetary financial institutions (MFIs) deposit accounts. The change in definition of NFCs under ESA 2010 markedly reduced Irish NFC debt, but it still remains quite elevated. Nearly half of NFC debt was with non-resident lenders, most likely reflecting the activities of multinational corporations (MNCs). The enhancements to the QFA data will be particularly useful in assessing financial stability risks to the economy and the potential transmission of risks between the institutional sectors of the economy.
|31/03/2015||The Changing Nature of Irish Exports: Context, Causes and Consequences
Since the beginning of the century there have been some notable structural shifts in the composition of Irish exports: services exports have become more prevalent; the export basket has become more concentrated; and the importance of trade in intermediate goods and services has risen. At the same time there is the continuing and relatively large role of foreign-owned and export-oriented multi-national enterprises in Ireland, and some evidence of changes in the dynamics of international trade globally in recent years. These shifts pose challenges for our understanding of how Irish export growth responds to changes in demand in our main trading partners, as well as the ultimate benefit of that export growth in terms of national income. Drawing on a number of relevant data sources, this Article explores these issues in more detail, highlighting the increasing complexity of analysing the prospects and benefits of external trade in the Irish case.
|30/01/2015||The Financial Position of Irish Households
This paper introduces a novel dataset on households’ income, assets and debts in Ireland: the Household Finance and Consumption Survey (HFCS). The HFCS is an invaluable resource for policy makers, allowing for household-level analysis of the composition of wealth and debt, leverage and the debt-service burden. Highlights include: the household main residence accounts for the majority of most households’ gross wealth (48 per cent on average); financial assets account for a much smaller proportion of gross wealth on average (13 per cent); more than half of households hold some form of debt, with mortgage indebtedness proving to be a particularly heavy burden for younger cohorts; however, the mortgage repayment burden is more evenly spread across the age distribution, with younger borrowers benefiting from low interest rates and long mortgage terms; the median value of net wealth is €105,000, in line with other Euro area countries (€109,000); the top 20 per cent of households hold 70 per cent of net assets – again, similar to the Euro area as whole; in Ireland, the concentration of wealth at the top end of the distribution is driven by two factors: larger holdings of real assets and relatively smaller holdings of debt.
|30/01/2015||The Instruments of Macro-Prudential Policy
The recent global crisis revealed a role for macro-prudential policy or measures to mitigate systemic risk. In Ireland, the high costs of the recent banking crisis showed that forward-looking risk assessments and pre-emptive policy action are important to ensure that the future probability of such a crisis reoccurring is reduced. Macro-prudential policies primarily aim to complement regulatory oversight of individual firms and build resilience, initially in the banking sector. A secondary (albeit more ambitious) goal is to dampen the volatility of the financial cycle and reduce the potential for destabilising imbalances within the financial system to accumulate. This paper focuses on the banking sector and the various measures available to macro-prudential authorities to mitigate this risk.