MEDIUM-TERM ANALYSIS OF FISCAL POLICY IN IRELAND: A MACROECONOMETRIC STUDY OF THE PERIOD 1967-1980. ESRI General Research Series Paper No. 122, July 1985

Bradley, John and FANNING, Connell and PRENDERGAST, Canice and WYNNE, Mark (1985) MEDIUM-TERM ANALYSIS OF FISCAL POLICY IN IRELAND: A MACROECONOMETRIC STUDY OF THE PERIOD 1967-1980. ESRI General Research Series Paper No. 122, July 1985. UNSPECIFIED.

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Abstract

The decade of the 1970s was characterised by fluctuations in the world economy of a kind whicb had not been experienced in peacetime since the 1930s. Even with the wisest and most prudent fiscal and monetary policies it would have been impossible to protect the Irish economy fully from the world-wide recession. Our objective in this paper is to investigate what effect fiscal policies had on tile evolution of the Irish economy over the period 1967 to 1980 and, with the benefit of hindsight, to attempt to formulate a judgement as to the manner in which fiscal policy was planned and executed. The "hindsight" from which we benefit has two major components: first our access to data which are at once more detailed and accurate than those available to successive Ministers of Finance at the time when they planned their budget strategies and second our use of a formal model of how the various sectors and agents in the economy interact with each other and evolve over time. While the first component (more accurate data) is an unqualified benefit, the second component (the model) is much more controversial since there is no absolute consensus in the economics profession on broad areas of macroeconomic theory and modelling practice. We are fully conscious of this problem and hope that the reader will not interpret our formal and detailed quantitative analysis as implying either ignorance or arrogance on our part in respect of the current very active international research into the foundations of macroeconomic theory and practice. It remains, of course, for the reader to decide whether our judgement, in relation to the gross simplifications needed in order to construct an operation’,d model of the economy, has been good or bad.

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