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External Balance Sheet Risks in Ireland

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  • Galstyan, Vahagn

    (Central Bank of Ireland)

  • Herzberg, Valerie

    (Central Bank of Ireland)

Abstract

Large external imbalances have been a persistent feature of most advanced economies, including Ireland. This is despite significant deleveraging of the Irish banking sector since the financial crisis. Given the presence of internationally oriented activities with little Irelandrelated business, early-warning indicator metrics related to the international investment position require adjustments in order to serve as useful monitoring tools.We propose to focus on a metric related to the net external debt liabilities of a narrow set of domestic Irish banks: a closer monitoring of the external balance-sheet risk is warranted when the net external debt liabilities of domestic banks exceed 17 per cent of modified gross national income.

Suggested Citation

  • Galstyan, Vahagn & Herzberg, Valerie, 2018. "External Balance Sheet Risks in Ireland," Financial Stability Notes 9/FS/18, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:9/fs/18
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/no-9-external-balance-sheet-risks-in-ireland-(galstyan-and-herzberg).pdf?sfvrsn=6
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    References listed on IDEAS

    as
    1. FitzGerald, John, 2018. "National accounts for a global economy: the case of Ireland," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Michael T. Kiley, 2018. "What Macroeconomic Conditions Lead Financial Crises?," Finance and Economics Discussion Series 2018-038, Board of Governors of the Federal Reserve System (US).
    4. Fidora, Michael & Giordano, Claire & Schmitz, Martin, 2017. "Real exchange rate misalignments in the euro area," Working Paper Series 2108, European Central Bank.
    5. Lane, Philip R., 2015. "The Funding of the Irish Domestic Banking System During the Boom," CEPR Discussion Papers 10777, C.E.P.R. Discussion Papers.
    6. Philip R. Lane, 2015. "The Funding of the Irish Domestic Banking System During the Boom," Trinity Economics Papers tep0515, Trinity College Dublin, Department of Economics.
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