Wednesday 12 June 2019

Due diligence and the Irish Central Bank

Barriers to exit are barriers to entry. If you're going to hire someone to a permanent position, you have to do a lot of due diligence. When I was on faculty at Canterbury, recruitment processes were very thorough as we appointed faculty to permanent positions - the norm in America is appointment to a limited-term position after which a faculty member may progress to tenure. So we tried to be careful. Mistakes could last for a very long time.

This morning, Radio New Zealand reported that the Irish Central Bank would not withdraw its offer of appointment to Secretary Makhlouf unless there were findings of "very very grave misconduct" in the current investigation.

That is a substantial barrier to exit. Firing governors of central banks should be hard if central banks are to be independent.

But where there are heavy barriers to exit, you need a lot of due diligence at the front end.

When Radio New Zealand's Madison Reidy asked economists around town whether I'm out on a limb in what I've been saying about Treasury, she couldn't find anyone who disagreed with me.

So I wonder just what kind of due diligence Ireland's version of SSC has undertaken. Did they ask any economists in New Zealand about how Treasury's fared over the past few years?

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