Using financial variables to estimate the Irish output gap: do they make a difference?

Summary:

Standard potential output estimates during Ireland’s housing boom failed to detect the build-up of imbalances and risks to the country’s public finances. This paper looks at an alternative methodology, including financial variables such as property prices and bank credit, which would have supported a more cautious assessment at the time.

Written by Mirzha de Manuel Aramendía, Rafal Raciborski

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