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Ireland’s External Debt: Economic and Statistical Realities

Listed author(s):
  • Creedon, Conn

    (Central Bank of Ireland)

  • Fitzpatrick, Trevor

    (Central Bank of Ireland)

  • Gaffney, Edward

    (Central Bank of Ireland)

Registered author(s):

    This letter considers Ireland’s external debt by sector and compares Ireland to other euro area member states. External debt measures are important for assessing financial stability risks, but Irish headline external debt includes the internationally-traded financial services sector, which leads to a somewhat misleadingly high gross external debt to GDP ratio of over 1,000 per cent. Excluding IFSC entities, gross external debt was approximately 300 per cent of GDP in Q2 2012. Multinational corporations outside the IFSC contribute to this high external debt figure. Among domestic sectors, banks had large gross external debts before the crisis, while official sectors increased external borrowing after 2008. Excluding the IFSC, in Q2 2012, Ireland’s net international investment position, the broadest measure of the net external balance based on financial assets as well as liabilities, represented a liability of 98 per cent of GDP, while net external debt, a narrower measure, was 95 per cent of GDP. This is sigificantly below the gross figure, but exceeds the average for comparable euro area member states.

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    Paper provided by Central Bank of Ireland in its series Economic Letters with number 12/EL/12.

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    Date of creation: Dec 2012
    Handle: RePEc:cbi:ecolet:12/el/12
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    1. Gros, Daniel & Alcidi, Cinzia, 2011. "Adjustment Difficulties and Debt Overhangs in the Eurozone Periphery," CEPS Papers 5525, Centre for European Policy Studies.
    2. Jochen R. Andritzky, 2012. "Government Bonds and their Investors; What Are the Facts and Do they Matter?," IMF Working Papers 12/158, International Monetary Fund.
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