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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.

Suggested Citation

  • Cussen, Mary & O'Leary, Brídín, 2013. "Why are Irish Non-Financial Corporations so Indebted?," Quarterly Bulletin Articles, Central Bank of Ireland, pages 104-118, January.
  • Handle: RePEc:cbi:qtbart:y:2013:m:01:p:104-118

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    References listed on IDEAS

    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, vol. 99(2), pages 466-472, May.
    3. 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.
    4. Ruscher Eric & Wolff Guntram B., 2013. "Corporate Balance Sheet Adjustment: Stylized Facts, Causes and Consequences," Review of Economics, De Gruyter, vol. 64(2), pages 117-138, August.
    5. Garry Tang & Christian Upper, 2010. "Debt reduction after crises," BIS Quarterly Review, Bank for International Settlements, September.
    6. 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.
    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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    Cited by:

    1. International Monetary Fund, 2016. "Ireland: Financial Sector Assessment Program; Technical Note-Nonbank Sector Stability Analyses," IMF Staff Country Reports 16/317, International Monetary Fund.
    2. Nir Klein, 2016. "Corporate Sector Vulnerabilities in Ireland," IMF Working Papers 16/211, International Monetary Fund.
    3. Creedon, Conn & O'Brien, Eoin, 2016. "Indicators for Setting the Countercyclical Capital Buffer," Economic Letters 02/EL/16, Central Bank of Ireland.
    4. Mary Cussen, 2015. "Deciphering Ireland’s Macroeconomic Imbalance Indicators: Statistical Considerations," The Economic and Social Review, Economic and Social Studies, vol. 46(2), pages 293-313.
    5. International Monetary Fund, 2013. "Euro Area Policies; Selected Issues Paper," IMF Staff Country Reports 13/232, International Monetary Fund.
    6. Kinga Niemczak, 2013. "Corporate Debt And Crisis Severity In Europe," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 9(1), pages 35-43, May.
    7. Hickey, Ronan & Kane, Linda, 2014. "Ireland and the Macroeconomic Imbalance Procedure," Quarterly Bulletin Articles, Central Bank of Ireland, pages 70-81, July.

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