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Why are Irish Non-Financial Corporations so Indebted?

  • Cussen, Mary

    (Central Bank of Ireland)

  • O'Leary, Brídín

    (Central Bank of Ireland)

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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File URL: http://www.centralbank.ie/publications/Documents/Why%20are%20Irish%20Non-Financial%20Corporations%20so%20Indebted.pdf
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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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  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. McElligott, Rory & O'Brien, Martin, 2011. "Irish Money and Banking Statistics: A New Approach," Quarterly Bulletin Articles, Central Bank of Ireland, pages 107-122, January.
  3. Eric Ruscher & Guntram Wolff, 2012. "Corporate balance sheet adjustment: stylized facts, causes and consequences," European Economy - Economic Papers 449, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  4. Reinhart, Carmen M. & Rogoff, Kenneth, 2009. "The Aftermath of Financial Crises," CEPR Discussion Papers 7209, C.E.P.R. Discussion Papers.
  5. Lawless, Martina & McCann, Fergal, 2011. "Credit Access for Small and Medium Firms: Survey Evidence for Ireland," Research Technical Papers 11/RT/11, Central Bank of Ireland.
  6. Garry Tang & Christian Upper, 2010. "Debt reduction after crises," BIS Quarterly Review, Bank for International Settlements, September.
  7. Creedon, Conn & Fitzpatrick, Trevor & Gaffney, Edward, 2012. "Ireland’s External Debt: Economic and Statistical Realities," Economic Letters 12/EL/12, Central Bank of Ireland.
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