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Stabilization and Adjustment in a Small Open Economy: Ireland, 1979-95

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  • Walsh, Brendan

Abstract

At the end of the 1970s, the Irish economy was faced with an unsustainable current account deficit, rising unemployment, high inflation, and a rapidly increasing public debt. By the mid-1990s Ireland's growth rate was the highest in the OECD, unemployment was declining rapidly, the current account was in surplus, and the country seemed likely to meet the Maastricht financial and fiscal convergence criteria. Domestic absorption has been sharply reduced despite a mild appreciation of the real exchange rate. External competitiveness, measured in terms of relative unit wage costs in a common currency, improved dramatically owing to the sharp increase in the share of foreign direct investment (FDI) in total capital formation. While the fiscal correction of the late 1980s helped restore private-sector confidence and was indispensable for progress on financial convergence, the boost to labour productivity given by the increased inflow of FDI is credited with the key role in the economy's transformation. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Walsh, Brendan, 1996. "Stabilization and Adjustment in a Small Open Economy: Ireland, 1979-95," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(3), pages 74-86, Autumn.
    • Handle: RePEc:oup:oxford:v:12:y:1996:i:3:p:74-86
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    Cited by:

    1. FitzGerald, John & Kearney, Ide & Morgenroth, Edgar & Smyth, Diarmaid, 1999. "National Investment Priorities For The Period 2000-2006," Research Series, Economic and Social Research Institute (ESRI), number PRS33.
    2. Valerie Cerra & Jarkko Soikkeli & Sweta C. Saxena, 2003. "How Competitive is Irish Manufacturing?," The Economic and Social Review, Economic and Social Studies, vol. 34(2), pages 173-193.
    3. Raymond Parsons, 2007. "The Emergence Of Institutionalised Social Dialogue In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 75(1), pages 1-21, March.
    4. Brendan M. Walsh, 2003. "Taxation and foreign direct investment in Ireland," Open Access publications 10197/1602, School of Economics, University College Dublin.
    5. Frank Barry, 2000. "Foreign direct investment, cost competitiveness and the transformation of the Irish economy," Development Southern Africa, Taylor & Francis Journals, vol. 17(3), pages 289-305.
    6. Eamonn D'Arcy & Tony McGough & Sotiris Tsolacos, 1999. "An econometric analysis and forecasts of the office rental cycle in the Dublin area," Journal of Property Research, Taylor & Francis Journals, vol. 16(4), pages 309-321, January.
    7. Velimir Šonje & Boris Vujčić, 1999. "Croatia In the Second Stage of Transition 1994–1999," Working Papers 1, The Croatian National Bank, Croatia.

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