Front Matter

Front Matter Page

© 1995 International Monetary Fund

August 1995

IMF Staff Country Report No. 95/76

Ireland—Background Papers

These background papers on Ireland were prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with this member country. In releasing this document for public use, confidential material may have been removed at the request of the member.

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Front Matter Page



Background Papers

Prepared by a staff team consisting of D. Ordoobadi, B. Arnason, L. Catao (all EUR I)

Approved by the European I Department

June 16, 1995


  • Basic Data

  • Introduction

  • I. The Irish Pound-Sterling Exchange Rate: Long-Term Trends and Main Determinants

    • 1. Introduction

    • 2. Trends in Ireland’s bilateral exchange rates

    • 3. Determinants of Ireland’s equilibrium real exchange rate with sterling

    • 4. Summary and conclusions

    • Appendix: A Model of the Real Equilibrium Exchange Rate Between the Irish Pound and Sterling

  • Text Tables

  • 1. Non-Linear Least Squares Estimation of the Equilibrium Real Exchange Rate between the Irish Pound and Sterling

  • 2. Unit Root Tests

  • Charts

  • 1. Nominal Exchange Rates

  • 2. Real Exchange Rates

  • 3. Real Exchange Rate Against the United Kingdom

Ireland: Basic Data

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Sources: Central Statistical Office, Statistical Bulletin; and data provided by Irish authorities.



The chapters of the background paper consider in greater detail issues raised in the staff report. The first two chapters consider elements of macroeconomic policy central to Ireland’s objective of being among the first countries to enter into European Economic and Monetary Union. The first chapter analyzes the main determinants of the Irish pound/sterling exchange rate, an issue brought to the fore by the currency turbulence of March 1995 which saw a sterling-inspired decline in the Irish pound against the deutsche mark. The second chapter considers recent fiscal developments and prospects, highlighting tax reform measures undertaken to accelerate job creation, the growth of spending in recent years, and the medium term fiscal outlook. The third chapter assesses the implications for the management of the large public sector debt of proposed changes in the structure of the Irish Government bond market.

The remaining chapters consider aspects of Ireland’s real economy. The difficulties posed for potential output calculations by Ireland’s elastic labor supply and the lack of comprehensive data on capital stock are considered in Chapter 4, which presents two alternative methods for estimating potential output and the output gap. The possible distorting effect of transfer pricing on output and trade data is considered in the fifth chapter against the backdrop of the important presence of multinational firms in Ireland and the preferential tax regime for manufacturing firms. Chapter 6 reviews the implications of the conclusion of the Uruguay agreement for Ireland’s highly open economy.


  • II. Recent Budgetary Developments

    • 1. Introduction

    • 2. 1994 budget and outturn

      • a. Revenue

      • b. Expenditure

    • 3. 1995 budget

      • a. Revenue

      • b. Expenditure

      • c. First quarter outturn

    • 4. Tax reform

    • 5. Recent trends in current expenditure

    • 6. Medium-term outlook

  • Charts

  • 4. Government Finance

  • III. Proposed Changes to the Structure of the Irish Government Bond Market

    • 1. Introduction

    • 2. Current market structure

      • a. NTMA and primary issuance

      • b. Secondary market

      • c. NTMA and the Central Bank

      • d. Shortcomings of the current system

    • 3. Proposed new market structure

      • a. Market making

      • b. Selection criteria for primary dealers

      • c. Obligations of primary dealers

      • d. NTMA support to primary dealers

    • 4. Main issues

  • Charts

  • 5. Interest Rate Developments

  • IV. Estimates of Output Gap for Ireland

    • 1. Introduction

    • 2. Segmented trend estimates

    • 3. HP filter estimates

    • 4. Summary and conclusions

  • Text Tables

  • 3. Segmented Trend Estimates of Output Gap

  • 4. HP Filter Estimates of Output Gap

  • Charts

  • 6. Output Gap (Segmented Trend Method)

  • 7. Output Gap (HP Filter Method)

  • V. The Significance of Transfer Pricing in Ireland and its Impact on Output Estimates

    • 1. Introduction

    • 2. Evidence of transfer pricing in Ireland

    • 3. Estimates of transfer pricing in Ireland

    • 4. Summary and conclusions

  • Text Tables

  • 5. Manufacturing Industry by Ownership, 1990

  • 6. Comparative Performance of U.S. Investment in Ireland

  • 7. Estimates of Transfer Pricing

  • VI. Impact of the Uruguay Round on the Irish Economy

    • 1. Introduction

    • 2. Framework

    • 3. Manufacturing

    • 4. Services

    • 5. Agriculture

    • 6. Macroeconomic impact

  • Text Tables

  • 8. Annual Output Effects of GATT Agreement

  • 9. Direct Employment Effects of GATT Agreement

  • Statistical Appendix

  • A1. National Accounts

  • A2. Distribution of National Income

  • A3. Gross Capital Formation

  • A4. Sectoral Origin of Gross National Product

  • A5. Industrial Production

  • A6. Summary of Balance of Payments

  • A7. Merchandise Trade

  • A8. Exports by Sector of Origin

  • A9. Foreign Trade Shares

  • A10. Imports Classified by End Use

  • A11. Services and Transfers

  • Al2. Consumer, Wholesale, and Tradables Price Indices

  • A13. Wage and Productivity Indicators in Manufacturing

  • A14. Population and Employment

  • A15. Employment by Sector

  • A16. Overview of Public Finances

  • A17. Public Sector Debt

  • A18. Summary of Current and Capital Budgets

  • A19. Central Government Current Expenditure

  • A20. Public Capital Program

  • A21. Central Government Current Revenue

  • A22. Public Sector Employment

  • A23. EC Receipts, Loans, and Contributions

  • A24. Financing of the Exchequer Borrowing Requirement

  • A25. Exchange Rates and Interest Rates

  • A26. Exchange Rate Developments

  • A27. Selected Interest Rates

  • A28. Developments in Monetary and Credit Aggregates

  • A29. Monetary Survey

  • A30. Money Supply Formation

  • A31. Distribution of Private Sector Credit

  • A32. Official External Reserves

  • A33. Capital Transactions (Net)

  • A34. External Debt

  • A35. External Government Debt

  • A36. Foreign Debt Maturity Profiles

  • A37. Domestic Debt Maturity Profiles