Professor John FitzGerald:

First, the ESRI does not like to campaign. Instead, in both quarterly economic commentaries and medium-term reviews, we prefer to rely on research. We are uncomfortable with moving too far away from research. We had not done research on the financial sector since the late 1990s when Patrick Honohan left in 1998. Our area of expertise, one in which we had done a lot of research and are the experts, is fiscal policy. We concentrated on that channel. As I indicated earlier, if that channel had been operated properly, we would not have got into the mess.

We were conscious there were problems, however. I wrote to the Central Bank in February 2006 about an issue. I contacted it again in March or April 2007 about my concerns. If one looks at the 2007 April spring quarterly commentary, we did mention the financial risks.

In addition, we mentioned this in papers back to 2004 in the Dublin Economics Workshop. While we were conscious they were there, because we had not done research, we did not go into detail on that. Looking back on it, had I even looked at the data on the balance sheet of the banking system, I would have known there was a major problem. I would not have needed a lot of research to conclude it was not just fiscal policy. I feel that I made a serious mistake in not looking at the data on that. I suppose a lot of people relied on the fact that the Central Bank had the biggest number of economists doing research. As they were doing research on that area, were we to go out seeking funding for such research, the response would have been the Central Bank was doing it. The lesson for the future is that there is a need for two people or bodies to undertake research on any given area. However, what happened is a cause of regret. It is not because we were told not to, rather it is why I did not look at the data, as it would have stood out. Even though we had not done research, I think I would have said something on it.