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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). This paper updated the analysis presented in the Medium Term Review in 2008. This research, published in Recovery Scenarios for Ireland, 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 December 2009 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: Winter 2009). This report fed into the ongoing research underlying the ESRI’s Quarterly Economic Commentary. 

Over the last year research was carried out on:
  • The stance of fiscal policy: This research, using the HERMES macro-economic model of the Irish economy, considered each budget since 1976 – whether it was contractionary or expansionary. This analysis suggested a strong pro-cyclical pattern to policy.
  • Managing regional economies under EMU: This research considered the experience of Ireland and Spain since 1998. The results suggested that regional economies within EMU need to use fiscal policy in a more proactive fashion to manage the property market, especially the market for housing.
  • 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.

Future Research

  • The likely medium-term impact of the crisis on the Irish economy.
  • Managing regional national economies under EMU; the lessons from the last decade.
  • 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 research. 
  • Developing and documenting the HERMES macro-economic model of the Irish economy.
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.
The Irish economy is currently undergoing significant structural change. As a result, future research will focus on:

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