The Irish Financial Crisis Was Both Predictable and Preventable. to What Extent Do You Agree with This Statement?

DISCUSSION PAPER SERIES

No. 7811

WHATEVER HAPPENED TO IRELAND?
Morgan Kelly

INTERNATIONAL MACROECONOMICS

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WHATEVER HAPPENED TO IRELAND?
Morgan Kelly, University College Dublin and CEPR Discussion Paper No. 7811 May 2010
Centre for Economic Policy Research 53–56 Gt Sutton St, London EC1V 0DG, UK Tel: [phone], Fax: [phone] Email: [e-mail], Website: www.cepr.org This Discussion Paper is issued under the auspices of the Centre’s research programme in INTERNATIONAL MACROECONOMICS. Any opinions expressed here are those of the author(s) and not those of the Centre for Economic Policy Research. Research disseminated by CEPR may include views on policy, but the Centre itself takes no institutional policy positions. The Centre for Economic Policy Research was established in 1983 as an educational charity, to promote independent analysis and public discussion of open economies and the relations among them. It is pluralist and nonpartisan, bringing economic research to bear on the analysis of medium- and long-run policy questions. These Discussion Papers often represent preliminary or incomplete work, circulated to encourage discussion and comment. Citation and use of such a paper should take account of its provisional character. Copyright: Morgan Kelly

CEPR Discussion Paper No. 7811 May 2010

ABSTRACT Whatever Happened to Ireland?*
Abstract While Irish GNP quadrupled between 1990 and 2007, this Celtic Tiger growth came from two distinctive, sequential booms, with export driven growth during the 1990s being followed after 2000 by a credit fuelled construction boom. Bank lending rose from 60 per cent of GNP in 1997 to 200 per cent in 2008, causing a house price bubble and a building boom where 20 per cent of GNP came from construction. The collapse of the credit bubble leaves Ireland with high unemployment,

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