Predicting The Rise of the Celtic Phoenix: A Multivariate Logistic Regression Analysis

Owing to its remarkable economic recovery from the 2008 housing crisis, The Economist dubbed Ireland as “Celtic Phoenix.” Ireland’s real GDP per capita saw a notable 5% fall during its economic downturn between the years 2008-2010. Contrastingly, the European Union’s real GDP per capita saw a 3% slump during the years 2008-2010 and a 2% spike during the years 2012-2014, two numbers that pail when compared to the corresponding Irish figures. Today, Ireland’s remarkable economic recovery from the 2008 financial crisis, which many other countries have attempted to replicate, is undeniable. Therefore, Ireland’s case, with its whirlwind of financial ups and downs, gives us an unparalleled opportunity to evaluate the macroeconomic factors and financial indicators that scholars often associate with systemic financial crises which can erupt in developed and developing countries. In this honors thesis, we use an econometric model based on the macroeconomic variables (real GDP per capita, change in the terms of trade, EUR-USD exchange rate, real interest rate, inflation, the central government’s budget surplus), financial variables (M2 supply, availability of credit, liquidity of bank reserves, and real domestic credit), and institutional variables (the presence of an explicit deposit insurance scheme, and the quality of law enforcement) proposed by Demirguc-Kunt and Detragiache (1998) as catalysts to analyze the impact of these variables on the ex-post probability of an economic crisis erupting in Ireland during the years 2004-2020