Seventy Years of Irish Fiscal Policy: 1954-2024
Abstract
This paper analyses Irish fiscal policy over the last 70 years, considering how appropriate the fiscal stance was each year, given the state of the economic cycle. It finds that fiscal policy was generally pro-cyclical, aggravating rather than dampening fluctuations in economic activity. This was damaging to the long-term interests of the population. In two periods, the 1980s and 2009-2014, governments had little room to operate countercyclical fiscal policy. Instead, prolonged periods of austerity were needed to restore order to the public finances. The lesson from these two episodes was that inappropriate fiscal policy, as well as other policy failures, can be very costly for the economy. Also, when serious fiscal action is required to ensure government solvency, painful fiscal adjustment is better implemented speedily, rather than dragged out over many years.
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