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Disinflation, switching nominal anchors and twin crises: The irish experience

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  • Philip R. Lane

Abstract

This paper reviews the Irish disinflation of 1979-86 and the subsequent success in maintaining a low and stable average inflation rate. Joining the German-led EMS in 1979 broke a 153-year link with Sterling and hence is an example of a country switching nominal anchors in order to disinflate. Reducing inflation was made more difficult by a parallel fiscal crisis and the tension in maintaining competitiveness against diverging trading partners (the UK and continental Europe). Having paid the costs of disinflation and fiscal adjustment, Ireland has made a remarkable economic recovery in the last decade, combining rapid GDP and employment growth with an average annual inflation rate of only 2.4 percent.

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  • Philip R. Lane, 2000. "Disinflation, switching nominal anchors and twin crises: The irish experience," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(4), pages 301-326.
    • Handle: RePEc:taf:jpolrf:v:3:y:2000:i:4:p:301-326
    DOI: 10.1080/13841280008523408
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    Cited by:

    1. Lane, Philip, 2011. "The Irish Crisis," CEPR Discussion Papers 8287, C.E.P.R. Discussion Papers.

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