Figure 6 - uploaded by Patrick Honohan
Content may be subject to copyright.
Contexts in source publication
Context 1
... jury is still out on whether this credit growth is an autonomous driver of house prices or the response of a globalised credit supply to demand from house-buyers. Some interesting patterns emerge from Figure 6 showing credit and house-price growth. Spikes in house price inflation preceded credit growth before 2004, but the latest price surge might have been preceded by credit growth. ...
Context 2
... more dramatically, the net import of funds credit institutions doing business in Ireland to lend to Irish residents amounted to 41 per cent of GDP by the end of 2005. This has changed with astonishing speed (up from about 10 per cent at end 2003) ( Figure 6). This shows the extent to which it is global finance, and not solely the Irish financial system, that is providing finance to Irish borrowers. ...
Similar publications
Citations
... However, Honohan and Walsh (2002) argued that the stimulatory effects of the resulting lower interest rates came in the late 1990s which was relatively late and not very helpful timing. Honohan (2006) considered whether financial sector development might have been a driver of Ireland's twenty-year growth success but concluded that there was little evidence to support this idea. ...
The first section of this chapter presents a survey of the literature that has aimed to explain what caused the boom. It aims to discuss virtually all the economic explanations that have been put forward. These include fiscal stabilisation, tax cuts, delayed or belated convergence, strong demand growth in export markets, supply of labour, education, the single European market, EU structural funds, social partnership, foreign direct investment, the small/regional nature of the economy, Irish indigenous industry and some other explanations. The second section undertakes a preliminary assessment of the suggested explanations, arguing that some of them are not very convincing and that it will not be necessary to consider them further, whereas the others will call for further consideration and assessment in later chapters. The suggested explanations that remain for later consideration as potentially significant causes of the boom are strong demand growth in export markets, foreign direct investment, the single European market, education for fast-growing industries, the small/regional nature of the economy, Irish indigenous industry, EU structural funds and social partnership.
... 97 The significant level of the financial sector's lending to construction, and the sudden and significant increase in funds coming from abroad were both highlighted as potentially problematic. 98 Arguably economic advice within the Department of Finance did offer warnings of potential risks given the 'pro-cyclical fiscal action', however, the extent of such warnings have been debated. 99 Economists were also vocal in the media. ...
Histories of the development of professions show a profession's relationship with the state as key to its authority. Yet professions, to gain technocratic authority, also strive to depoliticise their discourses to gain technocratic authority. This dilemmatic tension is particularly true for the economics profession. The historical development of the Irish economics provides an interesting case, where a complicated relationship with the state ultimately strengthened the profession within a society. An initial formalisation trajectory of Irish economics was thrown off course by the formation of an independent Irish state in the 1920s. This marked a period of isolation for the profession and saw it ostracised from government policy. Subsequent developments also saw the Irish economists' position as critics of government policy rather than a core part of the state.
... Irish banks have a poor record in providing capital for investment. Even in the 1990s the contribution of the financial sector to growth was minimal (Honohan, 2006). The surge in bank lending in the 2000s systematically misallocated capital to the point where, in 2007, approximately two thirds of outstanding loans were related to property and another sixth to the financial sector itself (Ó Riain, 2009). ...
This publications addresses the following questions: What vision should guide Ireland's development? Where does Ireland wish to be ten years from now? What infrastructure is required? What services are required? How are such infrastructure and service requirements to be delivered? How are they to be financed? How are decisions on these issues to be made? How and on what basis is progress on these issues to be measured? What policy framework willensure that questins are answered? Among the authors of various chapters in this book are:Sean O'Riain; Sean Healy, Brigid Reynolds, Michelle Murphy, Thomas Fazi, Eoin Reeves and Colin Scott.
... Irish banks have a poor record in providing capital for investment. Even in the 1990s the contribution of the financial sector to growth was minimal (Honohan, 2006). The surge in bank lending in the 2000s systematically misallocated capital to the point where, in 2007, approximately two thirds of outstanding loans were related to property and another sixth to the financial sector itself (Ó Riain, 2009). ...
... Greece and Ireland were in the eye of this financial storm as their banks had become over-exposed to bad debt due to lecherous lending to property developers, and eventually this financial turbulence affected the national economy as a whole (Whelan, 2010;Roche et al., 2011). Honohan (2006) argued that the availability of easy money encouraged the construction industry to expand, property prices to rise, and eventually the domestic spending to catapult. As in Irish recession, the current recession in Greece, is very astute and extended due to a large fall in Gross National Product (GNP), and the rise in closures, layoffs and unemployment (Roche et al., 2011). ...
Nowadays, the global economic crisis (GEC) highly influences organizations through its macroeconomic causes and effects, which account for a significant impact on firms’ human resources (HR) practices and labor relations (IR) as well. Of greatest concern is the extent to which the actual impacts of the crisis may be hoarding future problems for organization’s operations. Owing to the dynamic nature of contemporary business, its complexity, along with the increasing need for expertise, strategic HR interventions are highly required in an attempt of creating mature and resilient, in HR terms, organizations which will be able to assure their competitiveness, survival, change and growth. However, most organizations (banks) failed to adequately finance their daily operations, accompanied by their failure to finance national economies as well. In that event, the straightaway effects of GEC have resulted into a collapse of most financial systems and in major shortages at financial institutions around the globe. The purpose of this paper is to highlight the impact of GEC through demonstrating key facts related to the current economic crisis in Greece, and more precisely for Greek banking organizations.
... Banks had not been central to the financing of the export-led Celtic Tiger period of the Irish Economy which ended about 2000 (Honohan, 2006). Nor do they seem to Competitive pressure on the leading banks to protect market share came especially from reckless expansion by one bank, Anglo-Irish (whose market share among Irishcontrolled retail banks jumped from 3 per cent to 18 per cent in a decade, as it grew its total portfolio by an average of 36 per cent real). ...
Hit by loan-losses from a bursting property bubble, the Irish banks were brought to near-collapse, contributing to one of the worst economic downturns of the global crisis. The sharp fall in nominal and real interest rates and the removal of exchange risk from foreign borrowing after euro membership played a part in these events. At the same time, several other countries have got into similar trouble, both recently and in decades gone by, so there is no guarantee that staying out of the eurozone would have prevented something comparable from happening. And the euro provided an anchor as the crisis broke.
... This suggests that careful financial regulation would have been even more important under EMU than it was beforehand. Instead, lax regulation allowed huge financial imbalances to emerge in the funding of the bubble (see Honohan, 2006, for details). Is there a political-economy dimension to why the property boom was allowed to spiral so far out of control? ...
... The current Governor of the Central Bank remarked in 2006 that whereas economists previously regarded finance as the handmaid of the real sector, "This old thinking has been superseded by evidence that an efficient financial system is a positive driver of growth." (Honohan, 2006) The failure of the casino model of international finance should ensure a greater focus on the real economy in future. ...
... The current Governor of the Central Bank, Patrick Honohan, in his review of the role of finance as a potential driver of the Irish economy identifies the extent of the increased reliance of the Irish banks on external funding as increasing from 10% of GDP in 2003 to 41% in 2005. However, he does not raise any particular concerns in relation to it (Honohan 2006). This in essence was because the global financial system was seen as integrated and a stable facilitator of growth. ...
... The banks got into trouble because they got caught up in the mass psychology of an unprecedented property bubble -the steepest and longest of the several national property bubbles of the late 1990s and early 2000s around the world. 2 Banks had not been central to the financing of the export-led Celtic Tiger period of the Irish economy which ended about 2000 (Honohan, 2006). However, they began to increase the share of their assets in property-related lending from less than 40 per cent before 2002 to over 60 per cent by 2006. ...
... 6 The scale of construction activity also began to cause concern, as did the worsening wage competitiveness situation (Fitz Gerald, 2005, Duffy, Fitz Gerald andKearney, 2005;Honohan and Leddin, 2006). Honohan (2006) highlighted the extent of foreign borrowing being used to finance the boom. Most, though not all, studies foresaw a downturn in property prices triggering recessionary pressures likely to be led by a contraction in housing construction. ...
... Probably the most satisfactory treatment is byMurphy (2005); the most trenchant byKelly (2006Kelly ( , 2007a, all of which contain further references, including to stockbroker economists -not all of whom were incorrigible boosters, contrary to popular opinion. As reported inHonohan (2006), even the relatively optimistic calculations ofMurphy (2005) implied that, by mid-2004, equilibrium prices were at least 26 per cent below actual. ...
The Irish banking system has been, in effect, on a life-support system since September 2008. Complacency resulted in the banks fuelling the late stage of an obvious construction bubble with massive foreign borrowing, leaving them exposed to solvency and liquidity risks which in past times would have been inconceivable. The Government’s steps to put the system back on a sound basis must have regard both to protecting taxpayers’ interests and to ensuring that credit flows to the economy are not hampered by inadequate capital or liquidity.
... The banks got into trouble because they got caught up in the mass psychology of an unprecedented property bubble -the steepest and longest of the several national property bubbles of the late 1990s and early 2000s around the world. 2 Banks had not been central to the financing of the export-led Celtic Tiger period of the Irish economy which ended about 2000 (Honohan, 2006). However, they began to increase the share of their assets in property-related lending from less than 40 per cent before 2002 to over 60 per cent by 2006. ...
... 6 The scale of construction activity also began to cause concern, as did the worsening wage competitiveness situation (Fitz Gerald, 2005, Duffy, Fitz Gerald andKearney, 2005;Honohan and Leddin, 2006). Honohan (2006) highlighted the extent of foreign borrowing being used to finance the boom. Most, though not all, studies foresaw a downturn in property prices triggering recessionary pressures likely to be led by a contraction in housing construction. ...
... Probably the most satisfactory treatment is byMurphy (2005); the most trenchant byKelly (2006Kelly ( , 2007a, all of which contain further references, including to stockbroker economists -not all of whom were incorrigible boosters, contrary to popular opinion. As reported inHonohan (2006), even the relatively optimistic calculations ofMurphy (2005) implied that, by mid-2004, equilibrium prices were at least 26 per cent below actual. ...
The Irish banking system has been, in effect, on a life-support system since September 2008. Complacency resulted in the banks fuelling the late stage of an obvious construction bubble with massive foreign borrowing, leaving them exposed to solvency and liquidity risks which in past times would have been inconceivable. The Government's steps to put the system back on a sound basis must have regard both to protecting taxpayers' interests and to ensuring that credit flows to the economy are not hampered by inadequate capital or liquidity.
