More generally, small, highly-globalised countries such as Ireland are inherently more volatile than larger economies: we can grow strongly for extended periods but are also especially vulnerable to negative shocks. For this reason, it is essential that the Central Bank is pro-active in the deployment of macroprudential policies that can improve resilience and mitigate the procyclical dynamics associated with excessive leverage.
The new rules that impose loan-tovalue and loan-to-income limits on most mortgages were introduced to protect borrowers and contribute to a safer financial system, which in turn also contributes to a more stable economy over the longer term.