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Ireland’s Great Depression

Author Info

  • Alan Ahearne

    (J. E. Cairnes Graduate School of Business and Public Policy, NUI Galway)

  • Finn Kydland

    (University of California Santa Barbara)

  • Mark A. Wynne

    (Federal Reserve Bank of Dallas)

Abstract

We argue that Ireland experienced a great depression in the 1980s comparable in severity to the better known and more studied depression episodes of the interwar period. Using the business cycle accounting framework of Chari, Kehoe and McGrattan (2005), we examine the factors that led to the depression and the subsequent recovery in the 1990s. We calculate efficiency, labour, investment and government wedges and evaluate the contribution of each to the downturn and subsequent recovery. We find that the efficiency wedge on its own can account for a significant portion of the downturn, but predicts a stronger recovery in output than occurred. The labour wedge also helps account for what happened during the depression episode. We also find that the investment wedge played no role in the depression.

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File URL: http://www.esr.ie/Vol37_2/05_ahearne_article.pdf
File Function: First version, 2006
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Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 37 (2006)
Issue (Month): 2 ()
Pages: 215-243

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Handle: RePEc:eso:journl:v:37:y:2006:i:2:p:215-243
Contact details of provider: Web page: http://www.esr.ie

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References listed on IDEAS
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  1. Barro, Robert J. & Sahasakul, Chaipat, 1986. "Average Marginal Tax Rates from Social Security and the Individual Income Tax," Scholarly Articles 3451298, Harvard University Department of Economics.
  2. Robert J. Barro & Chaipat Sahasakul, 1983. "Measuring the Average Marginal Tax Rate from the Individual Income Tax," University of Chicago - George G. Stigler Center for Study of Economy and State 26, Chicago - Center for Study of Economy and State.
  3. David Carey & Harry Tchilinguirian, 2000. "Average Effective Tax Rates on Capital, Labour and Consumption," OECD Economics Department Working Papers 258, OECD Publishing.
  4. Suparna Chakraborty, 2004. "Accounting for the 'Lost Decade' in Japan," Macroeconomics 0408009, EconWPA.
  5. Balke, Nathan S. & Wynne, Mark A., 1995. "Are deep recessions followed by strong recoveries? Results for the G-7 countries," Working Papers 9509, Federal Reserve Bank of Dallas.
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Blog mentions

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  1. Assorted Links
    by Martin Ryan in Geary Behaviour Centre on 2010-04-14 11:32:00
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Cited by:

  1. Zheng, Jinghai & Bigsten, Arne & Hu, Angang, 2006. "Can China’s Growth be Sustained? A Productivity Perspective," Working Papers in Economics 236, University of Gothenburg, Department of Economics.
  2. Erasmus Kristoffer Kersting, 2008. "The 1980s Recession in the UK: A Business Cycle Accounting Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 179-191, January.
  3. Sustek, Roman, 2009. "Monetary Business Cycle Accounting," MPRA Paper 17518, University Library of Munich, Germany.
  4. Simona E. Cociuba & Alexander Ueberfeldt, 2008. "Driving forces of the Canadian economy: an accounting exercise," Globalization and Monetary Policy Institute Working Paper 06, Federal Reserve Bank of Dallas.
  5. Brian Lucey & Charles Larkin, 2012. "Risk Tolerance and Demographic Characteristics: Preliminary Irish Evidence," The Institute for International Integration Studies Discussion Paper Series iiisdp406, IIIS.
  6. Renzo Orsi & Francesco Turino, 2014. "The last fifteen years of stagnation in Italy: a business cycle accounting perspective," Empirical Economics, Springer, vol. 47(2), pages 469-494, September.

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