Tuesday, December 22, 2009

Consequences of Recession in Ireland?

The debate into the Irish recession has naturally focused on the banking system and the fiscal adjustment. Ireland ran a large bubble in property for at least five years that added to revenue, inflating both the public sector coffers and the banking systems balance sheets. When the financial crisis hit, the vulnerability of this situation became rapidly apparent and we have witnessed an astonishing increase in unemployment as well as collapse of our banking system and a need for rapid fiscal adjustment that has, among other things, reduced take-home pay of public servants.

One real shame about our current situation is the lack of data to monitor how it is actually affecting people. The current micro-data infrastructure of Household Budget Survey, SILC, SLAN, SHARE, QNHS and others is simply ill-equipped to examine events that occur at this level of frequency. Thus, we simply do not know how households are smoothing consumption through this time period. For example, we know that many people have taken drastic reductions in their housing wealth but do not know how this actually affects their day-to-day lives with respect to availability of credit. Nor do we have any real sense of the extent to which certain groups are facing hard liquidity constraints in ways that may lead to real consequences for health and life outcomes. Anecdotally, we are hearing reports of paid doctors visits declining as the recession bites but have no sense of whether people's health is being placed in jeopardy. Similarly, preliminary data suggests an increase in suicide rates, but we are unable to examine the mechanisms through which the economy impacts on psychological distress. Savings have increased sharply as has consumption has declined but the academic community has no way of providing any micro-founded explanation of why this is happening.

We have been collecting monthly panel data here to track things like risk perception but the research is still too early stage to provide sufficient sample sizes for sub-groups to answer the questions above. My personal new year's resolution is to get this to a state where we can start engaging properly with policy in Ireland. High-frequency (i.e. monthly) data delivered quickly to academic researchers in a manner comparable to other countries is the only solution to the massive knowledge hole that exists in Ireland at present. We need to speed up the delivery of data so that papers can be written that are scientifically robust and timely enough to actually enter into the debate.

1 comment:

Liam Delaney said...

just to preempt, I am aware that agencies such as MABS and VdeP exist where people can go to if they are in trouble. in that sense, they act as a barometer. Yet, there are all sorts of reasons why such agencies are imperfect barometers of how people are smoothing over. I am sitting here with books from countries with far lower wealth than Ireland such as Indonesia and the amount they know from well-conducted surveys during the East-Asian crisis is really impressive compared to Ireland.