3) O Grada (1995) notes that since the Irish pound
was pegged to Sterling, one would have expected the Irish economy to receive a boost from the depreciation of Sterling that followed after the British Government's decision to leave the gold standard in 1931.
The sharp appreciation of sterling against all EMS currencies during 1979-81 brought the Irish pound
to as low as 74 U.
Statistical tests of PPP based on the behaviour of the Irish pound
since 1979 have been generally unfavourable to the hypothesis.
My test of the most important claim of the Irish Currency Report - that the over-issue of Bank of Ireland notes was responsible for the depreciation of the Irish pound
- is whether relative note issue and the exchange rate were co-integrated.
The majority of big bets are placed through accounts, but some of the Irish punters will want to bet in euros, just as they did with the Irish pound
, and it's up to us to cater for them.
A constant effective exchange rate, based on parity between the Irish pound
For a short period, until the Irish pound
ceases to be legal tender on February 10, the two currencies will run concurrently as the nation-alongside the majority of Europe, excluding Britain-gets used to the new set of notes and coins.
Following a three-and-a-half year period when the Irish pound
traded at close to its central rate within the ERM (Diagram 8), it fell to its floor on different occasions between September 1992 and January 1993.
Interest rates declined further in the second half of 1993, somewhat faster than the falling trend of German rates as the temporary risk premium vis-a-vis German rates, that had emerged prior to the devaluation of the Irish pound
at the beginning of the year, was eliminated.
Despite short-term measures to cushion certain exporters, the mounting costs of defending the currency led to a 10 per cent devaluation of the central rate of the Irish pound
at the end of January 1993.
Following the January 1993 currency realignment within EMS, which included a devaluation of the Irish pound
, financial market developments tended to be favourable.