Examination of hysteresis in Ireland: Estimating the implications of short term shocks for the long run economy and an econometrical analysis of sources of growth during the estimated hysteresis time horizon

Abstract

This dissertation aims to examine and estimate a quantified impact of hysteresis in Ireland, whereby the recent 2007 short term shock to the markets has created a lasting impact. This dissertation partly mirrors and applies the IMF (2012) report, suggesting that a one per cent movement in the NAIRU during 2008-2011 has created a persistent impact in the economy, by reducing Ireland’s potential output by approximately 0.64 per cent based on derived and assumed information. This dissertation has also employed an econometrical analysis, constructed by the author employing raw data that examines sources of GDP growth during a similar time period suggesting the prevalence of hysteresis. This dissertation has been built on surrounding literature which has been reviewed, alongside the methodology, in constructing the research approach and associated empirical methodology thus providing a statistically robust analysis. The overall analysis has been reviewed alongside the limitations and has suggested scope for further work.