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Why are Irish Non-Financial Corporations so Indebted?


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  • Cussen, Mary

    (Central Bank of Ireland)

  • O'Leary, Brídín

    (Central Bank of Ireland)

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    Based on debt-to-GDP ratio which is the most cited measure of non-financial corporation (NFC) debt, Ireland has one of the most indebted NFC sectors in Europe. This article examines the specific characteristics of the Irish economy to analyse elevated debt levels of NFCs relative to GDP and their continued rise despite the economic downturn. The article finds that Irish NFCs have a high debt-to-GDP ratio when compared with many EU countries. However, they are relatively less indebted when compared with the size of their balance sheets. The article concludes that these trends reflect the large and increasing activities of multi-national corporations (MNCs) in Ireland in recent years. While NFCs have significantly reduced borrowing from credit institutions through net loan repayments and loan write-downs, their borrowing from non-residents has increased substantially by 160 per cent between Q1 2008 and Q2 2012. Results also show that aggregate indicators can mask some of the underlying dynamics in the data.

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    Bibliographic Info

    Article provided by Central Bank of Ireland in its journal Quarterly Bulletin Articles.

    Volume (Year): (2013)
    Issue (Month): (January)
    Pages: 104-118

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    Handle: RePEc:cbi:qtbart:y:2013:m:01:p:104-118

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    References listed on IDEAS
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    1. Holton, Sarah & McCann, Fergal, 2012. "Irish SME credit supply and demand: comparisons across surveys and countries," Economic Letters 08/EL/12, Central Bank of Ireland.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 466-72, May.
    3. repec:cbi:qtbart:y:2011:m:01:p:107-122 is not listed on IDEAS
    4. Creedon, Conn & Fitzpatrick, Trevor & Gaffney, Edward, 2012. "Ireland’s External Debt: Economic and Statistical Realities," Economic Letters 12/EL/12, Central Bank of Ireland.
    5. Guntram B. Wolff & Eric Ruscher, 2012. "Corporate balance sheet adjustment: stylized facts, causes and consequences," Working Papers, Bruegel 696, Bruegel.
    6. repec:cbi:wpaper:11/rt/11 is not listed on IDEAS
    7. Garry Tang & Christian Upper, 2010. "Debt reduction after crises," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, September.
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