Volatility in Irish Quarterly Macroeconomic Data by Colm McCarthy (DKM Economic Consultants)

March 29, 2004

News

29/03/2004

 

Volatility in Irish Quarterly Macroeconomic Data by Colm McCarthy (DKM Economic Consultants)

Embargo 00:01 29th March 2004



Article appearing in the Quarterly Economic Commentary, Spring 2004



The Central Statistics Office has been publishing quarterly estimates of the main Irish National Accounts aggregates since the first Quarter of 1997. This paper examines the volatility in the Irish quarterly macroeconomic data series and finds the following:

 

 

  • The Irish economy with its high GDP/GNP ratio has large short-run variations in value-added components other than wages. The Irish quarterly macroeconomic data are seriously distorted by the unusual structure of Irish manufacturing in particular.
  • Quarter-to-quarter volatility in gross output (GDP) and gross income (GNP) is very pronounced for the Irish data, more so than for any other OECD country including comparable smaller economies.
  • The principal source of volatility in Irish real GDP lies in the recorded figures for industrial output with the excess volatility traceable to a small number of manufacturing sub-sectors, especially basic chemicals.
  • These sub-sectors are known to be dominated by exporting multinationals, whose shares in recorded output greatly exceed their shares in employment or in the generation of domestic demand.
  • These sectors have output valuations dominated by profits rather than wages, and fluctuations in output composition or in transfer pricing or both are clearly at the source of the quarter-to-quarter volatility in overall activity as measured.
  • The European national accounting rules do not cope easily with this statistically unusual combination; one suggestion is that the CSO might consider some method of smoothing the Net Factor Payments numbers, and perhaps some other components, on a quarterly basis.