Documents O'Farrell, Rory 13 results

"Although the increase in international firm mobility is well documented, its effects on macroeconomic aggregates and the labour market remain controversial. Multinational enterprises (MNEs) benefit from an international outside option during wage bargaining, leading to a decrease in average wages. However, a strategic incentive to hire extra workers in a foreign (home) plant in order to reduce wages in the home (foreign) plant has an indirect positive effect on wages due to spillovers resulting from an increased demand for labour. In a framework of frictional unemployment, permitting MNEs leads to a decrease in unemployment. Abstracting from transport and plant fixed costs, MNEs lead to higher wages. Including transport and plant costs generally leads to lower wages, though the effects are small. The strategic hiring effect is important in mitigating the fall in wages."

"At the beginning of the crisis in 2008 it was a widely reported view that Ireland had become uncompetitive, leading to calls for wage cuts. Since then wage rates in the private sector have been largely stable. However, Ireland has shown a strong improvement in exports despite a difficult international trading situation. This presents a puzzle. If wages in Ireland were uncompetitive, how could Ireland improve its export position so rapidly, without a general fall in wages? Ireland can best be described as having moved from a position of “super-competitiveness” to “competitiveness”. During the construction boom, exports remained an important driver of growth. Since 2008, the fall in nominal unit labour costs is entirely due to a move away from the labour intensive construction sector. However, while labour costs have been stagnant in Ireland, they have increased amongst our trading partners."

"This paper analyses two-way interactions between monetary policy and inequality in selected advanced economies. In the context of a highly accommodative monetary stance over recent years, the analysis focuses on the effects of monetary policy on inequality over the business cycle via its impacts on returns on assets, the cost of debt servicing and asset prices. While monetary policy easing has a priori ambiguous effects on income and net wealth inequality, in practice these effects are estimated to be small. Cross-country differences in the size and distribution of income and net wealth explain contrasting effects. A house price increase generally reduces net wealth inequality, while the opposite is true for increases in equity and bond prices. Higher inequality can reduce the effectiveness of monetary policy stimulus in boosting private consumption, but such effects are estimated to be small. Cross-country differences in the size and composition of household financial assets rather than in their distribution are more relevant for differences in the effectiveness of monetary policy, especially via the wealth channel."

"The set of monetary policy instruments has expanded since the start of the global financial crisis in the many OECD economies. Against this background, this paper analyses whether some of the new instruments should be retained in the long term when broader financial stability objectives are likely to feature more prominently as monetary policy goals than prior to the crisis. It also assesses if these new instruments should be used during the transition to this situation and when countries are stuck in persistent stagnation. In the post recovery situation, central banks could ultimately revert to targeting short-term market rates with small balance sheets. This might, however, require changes to monetary policy implementation due to new liquidity requirements. The transition to this situation will be lengthy and will require a mixture of liquidity draining instruments. Alternatively, they could adopt a floor system, which may benefit financial stability. The use of unconventional measures as a substitute for policy rate cuts will no longer be needed unless countries remain in persistent stagnation. Nevertheless, in the post-recovery normal, extended collateral and counterparty eligibility could be sustained, and currency swap lines among central banks could be expanded."

"The recent global recession has had differing effects on wages across Europe.This paper presents wage patterns for EU countries since the impact of the financial crisis, and compares them to previous trends. Wages in the countries hardest hit by the recession have underperformed when compared to previous trends. The role of wages in determining international competitiveness is also examined and the importance of the general price level as opposed to wage levels is highlighted."