The near-death experience of the celtic tiger
Manfred Gärtner, B. Griesbach, Giulia Mennillo
December 8, 2013 DOI: 10.1007/s10272-013-0478-3 (opens in new tab)
Study at a glance
AI-extracted from the abstract| Characteristics | Econometric model |
|---|---|
| Population | Ireland's government bond market |
| Topics | Near-death experience |
| Key points | Argues that Ireland's drift toward sovereign default was triggered by the global financial crisis and a gap between fundamental default risk and perceived risk as reflected in interest rates and credit rating downgrades. |
Abstract
This article narrates Ireland’s recent odyssey from the pride and envy of Europe to kneeling supplicant through the eyes of an econometric model of the government bond market. The exercise suggests that, in essence, two developments triggered and propelled Ireland’s drift towards sovereign default: first, the global financial crisis that drove Ireland into a severe recession with collapsing tax revenues and increasing unemployment; second, a gap between the post-2007 increase in sovereign default risk that can actually be linked to macroeconomic fundamentals and the much bigger increase in perceived risk reflected by high interest rates and communicated by the massive downgrades of Ireland’s sovereign debt rating.