Professor John FitzGerald:

There has been research which shows, in the simplistic models of estimating potential output with filters, that you will get a better answer if you include financial variables. There is a body of research on this. It was what you would expect but the problem is that the methodology is inappropriate. It is just taking the current EU methodology for establishing structural deficit and potential output, which is wrong and inappropriate for Ireland and gives the wrong answer. Adding in the financial variables, you may get a better fit but it is not going to come up with the right answer so I think there is a problem with this simplistic approach to estimating potential output. I can go down this route. I published an article in April of last year on this with my colleague, Edel Bergin, but it is taking us rather far from what Senator Barrett is talking about here. It is a very technical issue as to the filters and how you do this. I am happy to go down this route but it may take the Senator rather far from his remit.