Ireland's great depression

Alan Ahearne (), Finn Kydland and Mark Wynne

No 510, Working Papers from Federal Reserve Bank of Dallas

Abstract: We argue that Ireland experienced a great depression in the 1980s comparable in severity to the better known and more studied depression episodes of the interwar period. Using the business cycle accounting framework of Chari, Kehoe and McGrattan (2005), we examine the factors that lead to the depression and the subsequent recovery in the 1990s. We calculate efficiency, labor, investment and government wedges, and evaluate the contribution of each to the downturn and subsequent recovery. We find that the efficiency wedge on its own can account for a significant portion of the downturn, but predicts a stronger recovery in output. The labor wedge also helps account for what happened during the depression episode. We also find that the investment wedge played no role in the depression.

Pages: 31 pages
Date: 2005
New Economics Papers: this item is included in nep-dge, nep-his and nep-mac
Note: Published as: Ahearne, Alan, Finn Kydland and Mark A. Wynne (2006), "Ireland's Great Depression," The Economic and Social Review 37 (2): 215-243.
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Journal Article: Ireland’s Great Depression (2006)
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