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

February 1, 2013

Preview Citation

Format: Chicago

Mwanza Nkusu. Boosting Competitiveness to Grow Out of Debt: Can Ireland Find a Way Back to Its Future?, (USA: International Monetary Fund, 2013) accessed December 24, 2024

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.

Subject: Balance of payments, Econometric analysis, Export performance, Exports, Foreign direct investment, Foreign exchange, International trade, Real effective exchange rates, Vector autoregression

Keywords: Economic growth, Economywide country studies, Euro area debt crisis, Export, Export performance, Exports, Exports of G&S, FDI, FDI dynamics, FDI flow, Financial crises, Foreign direct investment, GDP, Global, High-tech export sector, Housing market bubble, Inward FDI, Ireland, Ireland's export, Market share, Public debt, Real effective exchange rates, REER appreciation, Revenue, Simultaneous equation models, Trading partners, Triangle exports growth, Vector autoregression, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/035
Stock No:

WPIEA2013035
ISBN:

9781475563658
ISSN:

1018-5941

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