Our paper is divided into five sections. The first one is the discussion of the current economic state of Ireland particularly using the 2008 and 2009 data plus the recent 2010 figures for an update, then we discuss the contributing factors to such a state in the next section. To get into the details, we examine and analyze the fiscal and monetary policies done recently. This will compose of the third and the fourth sections respectively, wherein analyses using economic theories will be in-depth. The last section discusses the question of how successful has the Irish government and the Central Bank been in managing the economy. Here we will be able to directly answer the question.
Ireland has been a success story, until the recent global economic recession. From an agricultural country at the start of 1900, Ireland experienced an unprecedented economic growth with its GDP doubling in size in a little more than a decade (ESRI). It entered the European Union in 1973, as one of the pioneering countries. Fuelled by its EU membership and several investment promotion policies, the Irish economy became the fastest growing economy among the EU members (iExplore). "In recent decades the Irish economy has been transformed from being agrarian and traditional manufacturing based to one increasingly based on the hi-tech and internationally traded services sectors. In 2007, the services sector accounted for 64 per cent of Irish GDP, while industry accounted for 33 per cent and agriculture just 3 per cent" (ESRI).
Ireland's economic transformation was achieved through the promotion of export-led and advanced technology business thorough an open economy. It has attractive packages to investors with its banking and finance growing significantly, together with tourism (iExplore).
Mr. John Hurley, Governor of the Central Bank and Financial Services Authority of Ireland noted that the current Irish economy is not comparable to what it has been 20 to 25 years ago, particularly in the area of standard of living, transforming from a relatively low standard of living to one with an average per capital income being above the entire EU Average (Hurley).
Over-all, it is the EU membership that can be safely assumed to have brought forth the change in Irish economy, transforming it from a mainly agricultural society into the "modern, technologically advanced Celtic Tiger economy" (European Union).
The remarkable economic growth that the country has achieved face an uphill at the start of 2007. "The pace of economic growth decelerated in the second half of 2007, largely due to a contraction in housing construction. In 2008 it is estimated that output fell for the first time since 1983, and the recession deepened in 2009" (ESRI). The graph below shows the GDP growth from 1997 to 2009. After 11 years of positive growth, with the highest posted in 1999 at near 12%, Ireland suffered a recession in 2008 and 2009. It posted a real GDP growth of around -2.5% in 2008 and around -7.1% in 2009.
The decline in GDP has been manifested in various economic aspects such as prices, production and employment.
Volatile Money Supply: Irish Inflation
Inflationary pressures has