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PUBLISHED, Leipzig, Germany, An analysis of the return and volatility of major stock market indices (S&P 500, Nikkei, and ISEQ 20), consumer confidence surveys (Michigan, Irish and Japanese consumer confidence) and affect content of economic news about the USA and Ireland is presented. The distribution of all the returns is non-normal.

The weighted average cost of capital (WACC) approach is used to estimate the IAA's cost of capital. To implement this approach, it is necessary to estimate the IAA's cost of equity, its cost of debt and its gearing ratio. Following a brief financial summary, the cost of equity is discussed in Section 3, the cost of debt is discussed in Section 4, the IAA's gearing is discussed in Section 5, and Section 6 brings these together in the WACC calculations to derive the estimate of the IAA's cost of capital. Not applicable

Using daily data for a select set of four Asian exchange rates, namely the Hong Kong dollar, the Singapore dollar, the Taiwan dollar and the Thailand baht, from October 1985 to October 2002, we apply principal components analysis and the O-GARCH model to describe the evolution and persistence in the correlations over time. We also estimate 2-, 3- and 4-variable multivariate GARCH models, without imposing the assumption of constant correlations, to investigate volatility interaction amongst the currencies. To allow for fat tails in the distributions of exchange rate changes, we use the multivariate student-t distribution in maximising our log-likelihood functions. Our results indicate the possibility of designing an Asian exchange rate system involving a number of the region’s currencies.

In its recommendation on the 2004 update of the Broad Economic Policy Guidelines (BEPGs), the European Commission (2004) issued country-specific recommendations for fiscal policy in the Central and Eastern European (CEE) countries that have recently joined the European Union (EU) (henceforth the EU-10 countries). All countries except Estonia and Slovenia were urged to reduce their general government deficits, or to pursue low budget deficits in a credible and sustainable way within the multi-annual framework of EU budgetary surveillance. Some countries have received additional recommendations (the Czech Republic to reform its health care and pension systems, Estonia and Lithuania to avoid pro-cyclical policies, and Poland to reform its pension system). Most new Member States will consequently have to reduce their fiscal deficits and/or will have to avoid pro-cyclical fiscal policies to comply with the BEPGs, but also because of the required convergence within the Economic and Monetary Union (EMU). Bearing in mind that the government balance for the new Member States was –5.7 per cent of gross domestic product (GDP) in 2003, the required reduction of fiscal deficits will not be easy. This has been acknowledged by the Commission, which has argued that the need to reach and maintain sound budgetary positions will require an appropriate time path between the necessary consolidation and the appropriate fiscal stance supporting the transition. Particular attention will also need to be given to country-specific circumstances, in particular to initial budgetary positions, to ongoing structural shifts in the new Member State economies, and to the possible risks resulting from current account imbalances and strong credit growth.

Using weekly observations on 9 Asian currencies from November 1976 to December 2003, we re-examine the evidence of an emerging yen block in North and Southeast Asia. In contrast to previous research that assumes instantaneous adjustment of exchange rates by the region’s Central Banks to variations in the world’s main global currencies, we use a dynamic general-to-specific Newey-West estimation strategy that allows gradual adjustment and calculation of both short and long run equilibrium responses. We find that there is no de facto yen block, but although the US dollar remains dominant throughout the region, the yen’s influence is rising amongst a subset of the currencies since the early 1990s. Irish Research Council for the Humanities and Social Sciences; Anglo Irish Bank

We examine the evidence of an emerging yen block in North and Southeast Asia using up to 27 years of weekly data on 9 bilateral yen exchange rates. The exchange rate returns are modelled in response to variations in their US dollar, German mark, and UK pound effective counterparts using a general-to-specific dynamic estimation strategy. We also investigate the pattern of regional trade integration over time. The results suggest increasing intra-regional trade integration, particularly regarding Japanese trade integration with the region. They also indicate the decreasing influence of the US dollar in terms of magnitude, the German mark in terms of scope and the UK pound in terms of both magnitude and scope with respect to exchange rate determination in the region. These findings are consistent with an emerging yen influence although not a defacto yen block.

Industrial sectors producing income-elastic products can grow rapidly but are highly vulnerable to fluctuations in the world economy. Policymakers need to take into account this trade-off between output and employment growth over the longer term and volatility in the short to medium term. We bring the principles of portfolio theory to bear on the issue. Our analysis is applied to Irish manufacturing employment where growth has been concentrated in foreign-owned sectors such as Office and Data Processing Equipment, Pharmaceuticals and Professional Instruments. We show that, increased volatility notwithstanding, the country’s hightech FDI-driven strategy has brought the economy’s industrial portfolio closer to the mean-variance efficiency frontier.

Industrial sectors producing income-elastic products can grow rapidly but are highly vulnerable to fluctuations in the world economy. Policymakers need to take into account this trade-off between output and employment growth over the longer term and volatility in the short to medium term. We bring the principles of portfolio theory to bear on the issue. Our analysis is applied to Irish manufacturing employment where growth has been concentrated in foreign-owned sectors such as Office and Data Processing Equipment, Pharmaceuticals and Professional Instruments. We show that, increased volatility notwithstanding, the country’s hightech FDI-driven strategy has brought the economy’s industrial portfolio closer to the mean-variance efficiency frontier.