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Macroeconomics

Current Research

In May 2009 the ESRI published a paper looking at how the Irish economy can recover from the current recession (Recovery Scenarios for Ireland). The analysis suggested that three problems needed to be tackled to restore the economy to a sustainable growth path: the major structural deficit in the public finances must be closed; competitiveness must be restored; and the banking system must be transformed so that it can profitably and effectively fund a future recovery. If these conditions are met, once the world economy recovers the Irish economy could see significant growth restoring some, but not all, of the ground lost in the current recession.

In 2008 the ESRI published its latest Medium-Term Review  analysing the recent behaviour of the Irish economy and the implications of this behaviour for the potential growth rate of the Irish economy in the medium term. In November 2008 a report was published by the ESRI as part of the EUROFRAME Network of European economic research institutes considering the impact of the world recession on the EU economy (Economic Assessment of the Euro Area: Autumn Report 2008). This report fed into the ongoing research underlying the ESRI’s Quarterly Economic Commentary. 

Over the course of 2008 research was carried out on:

  • The macro-economic effects of taxation, especially of carbon taxes: This research indicated that because a carbon tax would have little impact on the labour market, its negative economic consequences would be much less than those for an equivalent increase in income taxation.

  • The misperception of inflation by Irish consumers: This research reveals systematic overestimation of inflation by Irish consumers, which varies by social group. There is evidence that inflation misperceptions are linked to attitudes and intentions with respect to consumption and saving and, hence, are likely to affect household decision making. The findings, therefore, raise issues regarding the relationship between financial literacy and consumer behaviour.

  • The factors driving the market services sector: The changing structure of the world economy means that many parts of the services sector are now tradable. As a result, international competitiveness matters much more for this sector today than it did twenty years ago. Today, 40 per cent of Irish exports are services and this percentage is likely to increase over the coming years.

  • The macro-economic impact of changing the rate of corporation tax: While the reduction in the rate of corporation tax applicable to the services sector after 1994 had a significant effect on economic growth, it was not one of the primary causes of rapid growth during the boom period of the late 1990s.  

Future Research

The Irish economy is currently undergoing significant structural change. As a result, future research will focus on:

  • Managing regional national economies under EMU; the lessons from the last decade.

  • The likely damage done to the Irish economy by the current recession and how best the current problems can be addressed

  • The changing balance between services and manufacturing in the wider economy.

  • The future prospects of the building and construction sector.

  • The effect on competitiveness of human capital and investment in infrastructure and R&D.

  • The impact of migration, investment in human capital, demographic change and institutional changes on the labour market.

The influence of external developments on Ireland will remain a key feature of the research in this area. 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 "Ireland in the Recession", click here.

Programme Coordinator: John Fitz Gerald


  • Link to current projects in this area.
  • Link to recently published research in this area
  • Link to recently published working papers in this area
  • Link to back catalogue of published research