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Current Research A major feature of the work of the ESRI on macroeconomics has been the development of key research infrastructure in the form of economic models. The HERMES macroeconomic model was built in the late 1980s and has undergone continuing development and improvement over the subsequent twenty years. It is a tool for understanding how the Irish economy behaves – what drives it and how it is likely to respond to changing circumstances at home and abroad. It has been used as an essential tool in the ESRI’s Medium-Term Reviews. It is also widely used to look at how macroeconomic developments may affect other aspects of the economy such as energy demand, environmental impact, skills needs and housing demand. A brief guide to the model is given in the 2003 Medium-Term Review. Over the course of 2010 research was carried out on: (a) The macroeconomic effects of the crisis on the Irish economy: This research considered how the economy has been affected by the crisis and the possible paths to recovery. The results of this research were published in the four Quarterly Economic Commentaries published over the course of the year. Using the HERMES model of the Irish economy, this research programme considered how different aspects of the economy were likely to behave in the medium term. The implications of this research for the Irish economy in the medium term were published in a study entitled Recovery Scenarios for Ireland: an Update. (b) Studies on the broader EU Economy and their Implications for Ireland: The results of a series of studies were published during 2010. The first publications considered the effects on the EU economy of the increased migration resulting from EU enlargement ("EU Enlargement and Migration: Assessing the Macroeconomic Impacts"). A second paper considered how the Spanish and Irish economies were affected by EMU membership, in particular how the housing markets were affected ("Managing Housing Bubbles in Regional Economies Under EMU: Ireland and Spain"). This paper drew conclusions on the appropriate use of fiscal policy. In December the ESRI, along with its colleagues in EUROFRAME, published a forecast for the Euro zone economy (Economic Assessment of the Euro Area: Autumn Report 2010). Work continued on perceived inflation during the EURO changeover in 2002. Finally the preliminary results of work on the EU banking sector and recovery in the EU economy was released (The Banking Sector and Recovery in the EU Economy). Future ResearchThe Irish economy is undergoing significant structural change. As a result, future research will focus on:
Central to the macroeconomics research effort is the development of models to improve understanding of the complicated processes driving the economy. These include the HERMES macroeconomic model, the ESRI’s Demographic Model and, more recently, its Small Labour Market Model. Over the coming years these models will be further developed to integrate insights derived from the microeconomic research carried out elsewhere in the ESRI.
For information and links to research relevant to understanding the "Irish Economy Today", click here.Programme Coordinator: John FitzGerald Others currently working in this area include: Alan Barrett, Adele Bergin, David Duffy, Joe Durkan, Petra Gerlach, Stefanie Haller, Ide Kearney, Edgar Morgenroth, Cormac O'Sullivan and Iulia Siedschlag. |






