Boosting Competitiveness to Grow Out of Debt Can Ireland Find a Way Back to its Future?

36 Pages Posted: 22 Feb 2013

See all articles by Mwanza Nkusu

Mwanza Nkusu

International Monetary Fund (IMF)

Date Written: February 2013


This paper investigates the prospects for Ireland to grow its economy against the backdrop of high indebtedness. The paper uses vector autoregressive analysis to explore the interlinkages among competitiveness, exports, economic growth, and fiscal performance. The emerging conclusion is that Ireland, which has regained cost competitiveness following the crisis-driven fall in domestic prices, is poised to return to its path of strong exports and economic growth and lower imbalances provided that it maintains competitiveness, though a pickup in external demand is critical. Three main findings underpin this conclusion. First, external demand is an important driver of exports and also the single most important determinant of Ireland's GDP and government revenue. Second, declines in price competitiveness, featured by real effective exchange rate (REER) appreciations, restrain exports and economic growth. Third, exports boost output, which in turn enhances fiscal performance.

Keywords: Forecasting, economic growth, economywide country studies., financial crises, public debt

JEL Classification: C39, F43, G01, H63, O50

Suggested Citation

Nkusu, Mwanza, Boosting Competitiveness to Grow Out of Debt Can Ireland Find a Way Back to its Future? (February 2013). IMF Working Paper No. 13/35, Available at SSRN:

Mwanza Nkusu (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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