Belén González Pardo
- 7 June 2024
- OCCASIONAL PAPER SERIES - No. 350Details
- Abstract
- The activities of multinational enterprises (MNEs) have become an increasingly important feature of the euro area economy, affecting output, trade and financial linkages. MNEs contribute to domestic output by maintaining large production facilities, offering high-paid jobs, bringing in new technologies and generating tax revenues. Following statistical changes implemented in 2015 to better capture the increasing importance of intangible investment, the economic impact of MNE activities has become much more evident in measures of intellectual property product (IPP) investment and external IPP trade flows. MNE activities, which often entail large and instantaneous transfers of IPP, are frequently highly volatile and can blur real-time assessment – and forecasting – of the business cycle, the current account and the capital stock in the euro area. Focusing on Ireland, given the strong prevalence of MNE activities in that economy and their importance for the euro area aggregate, this paper assesses the usefulness of the “modified” series for Irish non-construction investment and services imports. Using the modified series would provide a more accurate picture of the domestic dynamics of the Irish economy and enhance real-time assessment of the euro area business cycle, current account and capital stock. This paper brings insights into the unwinding of IPP shocks, which is a more straightforward exercise than seeking to anticipate the shocks themselves. The conclusions of this work underline the urgent need for more granular and internationally harmonised data on MNE activities to gain a clearer understanding of the dynamics of IPP operations and the implications for both short and long-term macroeconomic developments.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
- 19 May 2023
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2023Details
- Abstract
- Large-scale transfers of intellectual property products (IPP) conducted by multinational enterprises in Ireland are increasingly affecting euro area output, investment and trade measures. At the time of transfer, the within-quarter impact of these inflows tends to be neutral for euro area real GDP growth, as IPP transfers are often accompanied by services imports of equal size. However, in subsequent quarters these inflows typically have a positive effect on euro area GDP growth, as they boost both the capital stock and future export streams.
- JEL Code
- E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F43 : International Economics→Macroeconomic Aspects of International Trade and Finance→Economic Growth of Open Economies
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
- 10 January 2023
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2022Details
- Abstract
- Headline inflation has increased sharply in the euro area and in the United States since the start of 2021. But there are major differences between inflation developments in these two economies. In particular, energy inflation has been much higher in the euro area – leading to higher headline inflation than in the United States in recent months. As the euro area is significantly more dependent on energy imports than the United States, the rise in energy prices constitutes a strong adverse terms-of-trade shock to euro area income. Amid the resulting relatively slower recovery from the pandemic in the euro area, the contribution of demand to core inflation has increased more gradually and later in the euro area than in the United States. In addition, the short-term outlook for economic growth is weaker in the euro area than in the United States and the US labour market is tighter, implying a relatively smaller impetus from economic activity and the labour market to inflation in the euro area. Looking ahead, professional forecasters expect inflation to be somewhat more persistent in the United States than in the euro area.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
F4 : International Economics→Macroeconomic Aspects of International Trade and Finance
N10 : Economic History→Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations→General, International, or Comparative
J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs