Institute's lack of banking specialist may have hindered it, says Ruane
THE ECONOMIC and Social Research Institute (ESRI) “would probably have done a better job” of predicting the financial crisis if its resources had been more robust, its director said yesterday.
Prof Frances Ruane, who has headed the ESRI since 2006, was speaking as the institute celebrated its 50th anniversary.
She said the institute had failed to make the link between problems in the housing market and the rest of the economy because it did not have a banking specialist.
She said repeated efforts had been made to hire a macro-economist with banking expertise, but this had not been possible. “There is a general shortage of macro-economists,” said Prof Ruane, adding that the institute has not yet managed to plug the vacancy.
The ESRI had been successful, she said, in identifying problems with the housing market and in repeatedly drawing attention to the State’s fiscal weaknesses.
“The issue was that we didn’t know what was going on in banking.”
She said the researchers had wrongly accepted the idea that banks only loaned to people who represented a “good risk”, and had relied on the assertions of the Financial Regulator that there was no problem in the sector.
As a result, the institute failed to make the connection between construction problems and stimulus problems, according to its director.
“That was where we were weak,” she said, adding that the unforeseen nature of the global financial crisis was also an issue.
Prof Ruane believes the State has done well in facing up to its problems and, in particular, in the sequencing of the measures the Government has taken.
She suggested that there could be a greater role for “outsiders” to play in providing economic advice to Ireland, citing her current position as member of Scotland’s Council of Economic Advisers.