Boosting Competitiveness to Grow Out of Debt—Can Ireland Find a Way Back to Its Future?

 
Author/Editor: Nkusu, Mwanza
 
Publication Date: February 01, 2013
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper investigates the prospects for Ireland to grow its economy against the backdrop of high indebtedness. The paper uses vector autoregressive analysis to explore the interlinkages among competitiveness, exports, economic growth, and fiscal performance. The emerging conclusion is that Ireland, which has regained cost competitiveness following the crisis-driven fall in domestic prices, is poised to return to its path of strong exports and economic growth and lower imbalances provided that it maintains competitiveness, though a pickup in external demand is critical. Three main findings underpin this conclusion. First, external demand is an important driver of exports and also the single most important determinant of Ireland’s GDP and government revenue. Second, declines in price competitiveness, featured by real effective exchange rate (REER) appreciations, restrain exports and economic growth. Third, exports boost output, which in turn enhances fiscal performance.
 
Series: Working Paper No. 13/35
Subject(s): Global competitiveness | Ireland | Public debt | Economic growth | Foreign direct investment | Economic models

 
English
Publication Date: February 01, 2013
ISBN/ISSN: 9781475563658/2227-8885 Format: Paper
Stock No: WPIEA2013035 Pages: 35
Price:
US$18.00 (Academic Rate:
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