Professor Alan Ahearne:

There were two reasons.

In the 1980s, much of the literature tried to explain why economies go through booms and busts and why we get business cycles and seemed to be able to explain this without referring to banking sectors. The literature suggested the booms and busts were driven by different factors, either by productivity shocks that hit our economy or, at a later stage, by monetary policy, but that there was no need for credit cycles per se.

In addition, modelling for this was different technically, as the more elements put into a model, the more difficult it gets. Therefore, when one added in credit markets - although critical - the model got very complicated. Deputy McGrath asked me earlier what we would see differently if we added extra countries and their experience over the past six or seven years into a study like ours. What we see that is different - the IMF has done this type of study - is that the relationship between the credit and property is now very clear. However, it was far less clear when we were doing our study. We had some property booms where credit had not expanded that much. The finding we all talk about now is that we should get worried about property booms if there is an accompanying credit boom. This is a more recent finding, which benefits from the fact we have far more observations in the current experience.