David Haugh

What Drives Sovereign Risk Premiums

Cet article analyse les recents mouvements importants des ecarts de taux des obligations d’Etat des pays de la zone euro avec l’Allemagne. L’augmentation generalisee de l’aversion au risque qui a accompagne la crise financiere est un facteur important en soi. L’article montre en outre que ce phenomene a amplifie l’impact des performances budgetaires, en particulier quand elles sont mesurees par le ratio du service de la dette aux recettes fiscales et par les deficits budgetaires anticipes. De plus, ces effets se revelent non lineaires, ce qui se traduit par le fait que les deteriorations supplementaires des performances budgetaires amenent a des augmentations toujours plus importantes des ecarts de taux. Ces resultats suggerent que les reactions des marches financiers pourraient devenir une contrainte de plus en plus importante a la politique budgetaire de certains pays, une caracteristique qui etait beaucoup moins visible durant les annees anterieures a la crise ou l’aversion generale au risque etait anormalement basse.This paper analyses recent large movements in the yield spread for sovereign bonds as between Germany and other euro area countries. While the general increase in risk aversion that has characterised the financial crisis is an important factor on its own, it is found that this has also magnified the importance of fiscal performance, in particular as measured by the ratio of debt service to tax receipts and expected fiscal deficits. Moreover, there is evidence to suggest that such effects are non-linear, so that incremental deteriorations in fiscal performance lead to ever larger increases in the spread. These findings imply that financial market reaction could become an increasingly important constraint on fiscal policy for some countries, a feature which was much less apparent in the years prior to the financial crisis when general risk aversion was abnormally low. Quels sont les determinants des primes de risque des Etats ? : Une analyse recente de la zone euro Cet article analyse les recents mouvements importants des ecarts de taux des obligations d’Etat des pays de la zone euro avec l’Allemagne. L’augmentation generalisee de l’aversion au risque qui a accompagne la crise financiere est un facteur important en soi. L’article montre en outre que ce phenomene a amplifie l’impact des performances budgetaires, en particulier quand elles sont mesurees par le ratio du service de la dette aux recettes fiscales et par les deficits budgetaires anticipes. De plus, ces effets se revelent non lineaires, ce qui se traduit par le fait que les deteriorations supplementaires des performances budgetaires amenent a des augmentations toujours plus importantes des ecarts de taux. Ces resultats suggerent que les reactions des marches financiers pourraient devenir une contrainte de plus en plus importante a la politique budgetaire de certains pays, une caracteristique qui etait beaucoup moins visible durant les annees anterieures a la crise ou l’aversion generale au risque etait anormalement basse.

Transitions in and Out of Unemployment Among Young People in the Irish Recession

Young people have been hit hard by unemployment during the Irish recession. While much research has been undertaken to study the effects of the recession on overall labour market dynamics, little is known about the specific effects on youth unemployment and the associated challenges. This paper attempts to fill this gap by comparing the profile of transitions to work before the recession (2006) and as the economy began to emerge from the recession (2011). The results indicate that the rate of transition of young people from unemployment to employment fell dramatically. The fall is not due to changes in the composition or the characteristics of the unemployed group but to changes in the external environment. These changes imply that the impact of certain individual characteristics changed over the course of the recession. In particular, for youth, education and nationality have become more important for finding a job in Ireland.

Les transitions de périodes de chômage et emploi parmi les jeunes dans la récession irlandaise

This research attempts to answer two particular questions: a) what factors drive SME credit constraints in the Irish economy and b) what is the impact of such constraints on the macro-economy, in particular on employment and investment. We find that constraints decrease with firm size while there is variation by sector. Our results indicate that firms applying to foreign-owned banks are more likely to be constrained. We also identify a direct effect of debt overhang on access to credit. Linking constraints to the macro-economy, we find a negative and significant effect of SME credit constraints on employment, while no effect is evident on firm investment.

Pedal to the Metal: Structural Reforms to Boost Long-Term Growth in Mexico and Spur Recovery from the Crisis

While Mexico’s growth performance has gradually improved over the past decades, its convergence toward OECD countries has been less rapid than in several other emerging markets. The recent significant reductions in import tariffs should help the economy take fuller advantage of trade and investment integration, which could be a relative strength for Mexico given its geographic location. Reforms introduced in the past two years, including those to promote competition and transparency in the financial sector and, to a lesser extent in telecommunications, will also stimulate the dynamism of the economy. Despite this progress, further reforms are needed to boost overall and within-sector productivity. Relative weaknesses in education, infrastructure, financial development, the rule of law, as well as a lack of competition come out in various studies as explaining why Mexico has not grown as fast as other countries. Focusing attention now on reforms in areas with rapid pay-offs such as improving competitiveness and infrastructure could yield double benefits in supporting the recovery from the current recession and longer-term growth. This can be achieved by increasing competition, especially in network industries, liberalizing further the foreign investment and trade regimes, and improving education coverage and trade-related infrastructure. Pied au plancher : Des reformes structurelles pour dynamiser la croissance a long terme au Mexique et accelerer la sortie de crise Ces dernieres decennies, le Mexique a progressivement ameliore ses performances en matiere de croissance, mais sa convergence vers les pays de l’OCDE a ete beaucoup moins rapide que celle de plusieurs autres marches emergents. Les recentes reductions substantielles des droits a l’importation devraient aider l’economie a profiter plus pleinement de l’integration des echanges et des investissements, ce qui pourrait constituer un atout relatif pour le Mexique compte tenu de sa situation geographique. Les reformes lancees ces deux dernieres annees, notamment celles qui visent a promouvoir la concurrence et la transparence dans le secteur financier et, a un degre moindre, dans les telecommunications, stimuleront egalement le dynamisme de l’economie. En depit de ces progres, de nouvelles reformes s’imposent pour favoriser la productivite globale et sectorielle. Selon diverses etudes, si la croissance du Mexique n’a pas ete aussi rapide que celle des autres pays, cela tient aux faiblesses relatives concernant l’education, le developpement du secteur financier et l’Etat de droit, a quoi s’ajoute le manque de concurrence. Concentrer maintenant l’attention sur des reformes rapidement rentables – en ameliorant, par exemple, la competitivite et les infrastructures – pourrait generer un double effet positif : soutenir la reprise pour sortir de la recession actuelle et creer de la croissance a long terme. On peut y parvenir en developpant la concurrence, notamment dans les industries de reseau, en liberalisant davantage le regime des investissements etrangers et des echanges commerciaux, et en ameliorant la couverture de l’enseignement et les infrastructures liees au commerce.