, labour market integration between the uk and ireland has always been close, and was particularly important in the context of the recent downturn. 1 there is the potential for a positive impact on growth from cross - border investment linkages arising from net international investment inflows. this extends beyond the financial sector, and might include new investment in technology and fin - tech sectors. in the context of these key channels, our forecasts incorporate a negative adjustment to projected gdp growth because of brexit related factors amounting to about 0. 6 per cent in 2017 and 0. 2 per cent in 2018. the central bank is also closely monitoring the exposures of domestic irish banks to the uk, given their prominence in some cases, and potential channel for contagion. in the transition period to establishing new arrangements between the uk and the eu, there is the potential for further bouts of heightened uncertainty and risk aversion. macroeconomic, financial and currency market effects will be heavily influenced by the related terms, timing and impact of the new relationship. therefore, there is the possibility for more acute confidence effects on investment and consumption decisions. 2 / 6 bis central bankers'speeches financial stability considerations given the macroeconomic environment i will now turn to some financial stability considerations. the mission of the central bank is to ‘ safeguard stability, protect consumers ’. a hard exit could result in the considerable migration of financial services firms. since june there has been much talk of a new financial hub in europe with many cities including dublin put forward as possible candidates. i do not believe that a ‘ new london ’ will necessarily emerge in europe but rather there may be a fragmentation of financial services across several european cities. authorisation - related activity has continued to increase including queries from banks, markets firms, queries regarding payments and electronic money, and insurance authorisations. however, to date, these have largely been exploratory. many firms will wait until article 50 is triggered before taking concrete decisions on activity and location. our authorisation process has been clearly outlined on many occasions. 2 firms will be engaged in an efficient, open and rigorous process. we expect there to be a substantive presence here in ireland. the establishment of new firms does indeed bring the prospect of potential upside in the form of new employment in the financial services sector. however, it is too early to say how material this will be. nonetheless, for financial services, we operate under a common framework for regulation and supervision. this should ensure other broader

necessary to recognise the genuine trade offs that exist, especially if the labour market returns to full employment. for instance, additions to the public capital stock can be expected to raise the productive capacity of the economy and / or assist in the attainment of social objectives over the medium term. however, the process of public investment acts to raise aggregate demand in the near term. a stepping up in public investment under conditions of full employment may require counter - vailing measures to limit the risk of costly over - heating dynamics. alternatively, stretching out a planned public investment programme over a longer horizon can limit pressures on the absorptive capacity of the economy. in this spirit, it is welcome that the recently - published national development plan envisages a phased approach to increasing the scale of public investment towards its medium - target of about 4 percent of gni *. a targeted approach over the medium term can address the potential cyclical pressures associated with surges in public investment and help to ensure that private investment is not crowded out. research for ireland shows that when government investment is financed in 3 / 7 bis central bankers'speeches a budget - neutral way, particularly when the economy is operating close to full capacity, the benefits of increasing public capital can be achieved without the short - run costs of increased marginal costs for firms and a deterioration in competitiveness. the housing market turning to the second part of my speech, we published our comprehensive analysis of developments in the housing market as part of the annual review of our macroprudential framework last november. in relation to the level of house prices, our conclusion was that the data looked broadly in line with the values of the fundamental factors typically included in models of house prices. of course, it is important to emphasise always that these fundamental factors ( such as high rents ) are not indicators of a sustainable or socially - acceptable housing sector but rather just capture the most influential market forces in determining house prices. an important finding is that the evidence does not support a central role for credit dynamics in the current evolution of house prices. the most recent meeting of our macroprudential measures committee ( mmc ) on 19th january affirmed that aggregate credit conditions remain subdued, even if the pace of new mortgage lending has picked up. our analysis that house prices have moved broadly in line with fundamentals is fully consistent with a material risk of a reversal in house prices : buying a house is certainly not a one - way bet. in particular, international and domestic factors may trigger fundamentals -