POLICY OBJECTIVES FOR A
REGIONAL ECONOMY
Is Ireland a National or Regional Economy?
•No independent currency
•No independent control over monetary policy
•Trade policy is constrained by outside factors
(e.g. adherence to Single European Act)
•Constraints on fiscal policy
A region must seek to use its influence where
decisions are made
(e.g. at EU level in Brussels or at the ECB in Frankfurt)
Has Ireland always been a Regional
Economy?
•Culture of emigration post-famine
•“Ireland …functioned more as a regional economy, whose
population expands or contracts as economic conditions dictate,
than as a national economy whose population size is determined
largely by demographic factors (Barry 1999)
•Emigration placed a floor below which Irish wage levels could not fall
•Success of a regional economy largely determined by
competitiveness
Economic Policy Tools
Fiscal Policy
•Making changes to Taxes
and Government Spending
•Objectives
•Boost Long Term Growth
•Provide incentives to Save,
Invest, Innovate
•Smooth the Business Cycle
Monetary Policy
•Make changes to Interest
Rates & Quantity of Money
•Objectives
•Keep inflation in check
•Smooth the Business
Cycle
•Monetary policy and
EMU?
Policy Objectives
•Higher living standards – Sustainable Growth
•Fair distribution of income
•Full employment
•Satisfactory environmental standards
•Price Stability
•Consumer Prices
•Asset prices
•Competitiveness
•Financial System Stability
•Balance of Payments
How important is the rate of economic growth?
•Growth is a proxy for improved standards of living
•Growth extends the range of consumption possibilities
•Rapid economic growth usually leads to higher living
standards and is an indicator that the economy’s
resources are being used efficiently
•It is unsatisfactory if a country’s resources are being used
inefficiently or not being used at all
•There is a strong correlation between full employment
and economic growth
Measuring Growth
•We usually look at growth in terms of the rate of growth of
GNP per person
