From Tiger to PIIGS: Ireland and the use of heuristics in comparative political economy
AbstractAcronyms for groups of countries provide an often useful shorthand to capture emergent similarities, and terms such as PIIGS, BRICs and LDCs pervade the lexicon of international and comparative political economy. But they can also lead to misleading narratives, since the grounds for use of these terms as heuristic devices are usually not well elaborated. This can become problematic when the use of such heuristics drives market responses in areas such as risk perception and changes in interest rates. In this paper we look at the narrative construction of the group of countries that has been grouped as ‘PIIGS’ (Portugal, Ireland, Italy, Greece, and Spain). We examine the process whereby the group came into being, trace how Ireland became a member of this grouping, and assess the merits of classifying these countries together. Our contention is that the repetition of the acronym in public debate shaped the behaviour of market actors toward these countries. We find evidence of Granger causality, such that increased media usage of the term ‘PIIGS’ is followed by converging interest rate correlations between Ireland and the other PIIGS, compared to the interest rate correlations between Ireland and the ‘northern’ Eurozone economies. We argue that this is a pointer toward the independent effect of perceptions and discourse over economic fundamentals. We conclude with more general thoughts and cautions on the use of heuristics in comparative political economy.
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Bibliographic InfoPaper provided by Geary Institute, University College Dublin in its series Working Papers with number 201316.
Length: 27 pages
Date of creation: 01 Oct 2013
Date of revision:
PIIGS; interest rates; ratings agencies; media; financial crisis;
Find related papers by JEL classification:
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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