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Managing an Economy Under EMU: The Case of Ireland

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  • John Fitz Gerald

Abstract

Ireland's experience of limited monetary independence within the EMS indicated that such independence was bought at the price of significant risk premia on interest rates. This experience informed its decision to join EMU, and membership has resulted in the expected credibility gain. Since the start of EMU inflation in consumer prices in Ireland has risen well above the EU average. However, this need not be a matter of concern within a monetary union. Instead, what should concern the Irish administration is a high rate of inflation in wage rates and domestic asset prices chiefly housing. While monetary policy is no longer available as an instrument of domestic policy, fiscal policy can still be used to effectively target these problems. The lessons of the first three years of membership is that the focus of fiscal policy within Ireland needs to change, and that the EU institutions also need to focus more clearly on the needs of the Euro area rather than on those of individual regional economies. Copyright Blackwell Publishers Ltd 2001.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 24 (2001)
Issue (Month): 10 (November)
Pages: 1353-1371

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Handle: RePEc:bla:worlde:v:24:y:2001:i:10:p:1353-1371

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  1. Baker, Terence J. & FitzGerald, John & Honohan, Patrick, 1996. "Economic Implications for Ireland of EMU," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number PRS28.
  2. Irvine, Ian J., 1984. "A Study of New House Prices in Ireland in the Seventies," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number GRS118.
  3. Honohan, Patrick & Conroy, Charles, 1994. "Irish Interest Rate Fluctuations in The European Monetary System," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number GRS165.
  4. Bradley, John & Whelan, Karl & Wright, Jonathan, 1995. "HERMIN Ireland," Economic Modelling, Elsevier, Elsevier, vol. 12(3), pages 249-274, July.
  5. Bradley, John & Whelan, Karl, 1997. "The Irish expansionary fiscal contraction: A tale from one small European economy," Economic Modelling, Elsevier, Elsevier, vol. 14(2), pages 175-201, April.
  6. John FitzGerald & Fergal Shortall, 1998. "Exchange Rate Changes and the Transmission of Inflation," Papers, Economic and Social Research Institute (ESRI) WP096, Economic and Social Research Institute (ESRI).
  7. Duffy, David & FitzGerald, John & Kearney, Ide & Smyth, Diarmaid, 1999. "Medium-Term Review 1999-2005, No. 7," Forecasting Report, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number MTR07, March.
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Cited by:
  1. repec:esr:chaptr:jacb200114 is not listed on IDEAS
  2. Patrick Honohan & Anthony J. Leddin, 2006. "Ireland in EMU - More Shocks, Less Insulation?," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 37(2), pages 263-294.
  3. Bergin, Adele & Duffy, David & Eakins, John & McCoy, Daniel, 2002. "Forecasting the Public Finances and the Macroeconomic Context for Budget 2003," Papers, Economic and Social Research Institute (ESRI) BP2003/1, Economic and Social Research Institute (ESRI).
  4. Bergin, Adele & Conefrey, Thomas & FitzGerald, John & Kearney, Ide & Znuderl, Nusa, 2013. "The HERMES-13 macroeconomic model of the Irish economy," Papers, Economic and Social Research Institute (ESRI) WP460, Economic and Social Research Institute (ESRI).
  5. Honohan, Patrick, 2001. "European and International Constraints on Irish Fiscal Policy," Papers, Economic and Social Research Institute (ESRI) BP2002/2, Economic and Social Research Institute (ESRI).
  6. Patrick Honohan & Philip R. Lane, 2003. "Divergent inflation rates in EMU," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 18(37), pages 357-394, October.
  7. repec:esr:chaptr:jacb200210 is not listed on IDEAS
  8. Conall MacCoille & Daniel McCoy, 2002. "Economic Adjustment Within EMU - Ireland’s Experience," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 33(2), pages 179-193.
  9. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 198, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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