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The HERMES-13 macroeconomic model of the Irish economy

Author

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  • Bergin, Adele
  • Conefrey, Thomas
  • FitzGerald, John
  • Kearney, Ide
  • Znuderl, Nusa

Abstract

The HERMES macroeconomic model has been used extensively for over 25 years to carry out medium-term forecasting and scenario analysis of the Irish economy. Most recently the model has been used to generate the scenarios underpinning the 2013 edition of the ESRI's Medium-Term Review. In the long period over which the model has been used for policy analysis, the Irish economy has undergone substantial change and new approaches to modelling important economic relationships have been developed. This paper outlines the structure and behaviour of the most recent version of the HERMES model (HERMES-13). We describe the key mechanisms and the modelling innovations which have been introduced to deal with major changes in the economy. As the model draws on a range of research on the Irish economy, we describe how this work has been incorporated into the model to better capture key economic relationships. Finally, we examine the results of a series of shocks to key variables carried out using the model. This provides a benchmark against which to evaluate the long-run properties of the model as well as illustrating how the model can shed light on the key transmission channels in the economy. This paper, and the accompanying detailed model listing and estimation output, provides a basic reference manual that practitioners and interested parties can use to interpret model output and, it is hoped, make suggestions for further model development and improvement.

Suggested Citation

  • Bergin, Adele & Conefrey, Thomas & FitzGerald, John & Kearney, Ide & Znuderl, Nusa, 2013. "The HERMES-13 macroeconomic model of the Irish economy," Papers WP460, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp460
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    References listed on IDEAS

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    1. Di Cosmo, Valeri & Hyland, Marie, 2012. "The ESRI Energy Model," Papers WP424, Economic and Social Research Institute (ESRI).
    2. Doris, Aedin, 2001. "The Changing Responsiveness of Labour Supply during the 1990s," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2001(4-Decembe), pages 1-14.
    3. John FitzGerald & Mary Keeney & Sue Scott, 2009. "Assessing vulnerability of selected sectors under environmental tax reform: the issue of pricing power," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 52(3), pages 413-433.
    4. Conefrey, Thomas & Fitz Gerald, John D., 2011. "The macro-economic impact of changing the rate of corporation tax," Economic Modelling, Elsevier, vol. 28(3), pages 991-999, May.
    5. John Fitz Gerald, 2001. "Managing an Economy Under EMU: The Case of Ireland," The World Economy, Wiley Blackwell, vol. 24(10), pages 1353-1371, November.
    6. Znuderl, Nusa & Kearney, Ide, 2013. "User Cost of Debt-Financed Capital in Irish Manufacturing Industry: 1985 ? 2011," Papers WP448, Economic and Social Research Institute (ESRI).
    7. Christopher M. Gunn & Alok Johri, 2013. "Fear of Sovereign Default, Banks, and Expectations-driven Business Cycles," Department of Economics Working Papers 2013-08, McMaster University.
    8. Thomas Conefrey & John Fitz Gerald, 2010. "Managing Housing Bubbles In Regional Economies Under Emu: Ireland And Spain," National Institute Economic Review, National Institute of Economic and Social Research, vol. 211(1), pages 91-108, January.
    9. Walsh, Brendan M., 1968. "Some Irish Population Problems Reconsidered," Research Series, Economic and Social Research Institute (ESRI), number GRS42.
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    11. John Curtis & John FitzGerald, 1994. "Convergence in an Open Labour Market," Papers WP045, Economic and Social Research Institute (ESRI).
    12. John Bradley & Gerhard Untiedt, 2012. "Assessing the impact of EU Cohesion Policy: What can economic models tell us?," HERMIN Economic Papers 2-2012, HERMIN.
    13. David Duffy & John Fitz Gerald & Ide Kearney, 2005. "Rising House Prices in an Open Labour Market," The Economic and Social Review, Economic and Social Studies, vol. 36(3), pages 251-272.
    14. Kearney, Ide, 2012. "Measuring Fiscal Stance," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2012(3-Autumn).
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    Citations

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    Cited by:

    1. Haller, Stefanie A. & Hyland, Marie, 2014. "Capital–energy substitution: Evidence from a panel of Irish manufacturing firms," Energy Economics, Elsevier, vol. 45(C), pages 501-510.
    2. Bercholz, Maxime & FitzGerald, John, 2016. "Recent Trends in Female Labour Force Participation in Ireland," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    3. repec:eso:journl:v:47:y:2016:i:1:p:1-31 is not listed on IDEAS
    4. Mulholland, Eamonn & O'Shea, Richard S.K. & Murphy, Jerry D. & Ó Gallachóir, Brian P., 2016. "Low carbon pathways for light goods vehicles in Ireland," Research in Transportation Economics, Elsevier, vol. 57(C), pages 53-62.
    5. Brendan O'Connor, 2013. "The Structure of Ireland’s Tax System and Options for Growth Enhancing Reform," The Economic and Social Review, Economic and Social Studies, vol. 44(4), pages 511-540.
    6. Bergin, Adele & FitzGerald, John, 2014. "The Structural Balance for Ireland," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    7. Bergin, Adele & Conroy, Niall & Garcia Rodriguez, Abian & Holland, Dawn & McInerney, Niall & Morgenroth, Edgar & Smith, Donal, 2017. "COSMO: A new COre Structural MOdel for Ireland," Papers WP553, Economic and Social Research Institute (ESRI).
    8. Clancy, Daragh & Merola, Rossana, 2017. "Countercyclical capital rules for small open economies," Journal of Macroeconomics, Elsevier, vol. 54(PB), pages 332-351.
    9. Daragh Clancy & Rossana Merola, 2016. "ÉIRE Mod: A DSGE Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(1), pages 1-31.
    10. FitzGerald, John & Kearney, Ide & Bergin, Adele & Conefrey, Thomas & Duffy, David & Timoney, Kevin & Znuderl, Nusa, 2013. "Medium-Term Review: 2013-2020, No. 12," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR12, April.
    11. Niall McInerney, 2016. "A Structural Model of Macroprudential Policy: the Case of Ireland," EcoMod2016 9643, EcoMod.

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    modelling/Policy/scenarios;

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