As indicated above, our plan now is to examine the potential additional contribution of the systemic risk buffer in ensuring that the banking system would be resilient in the event of a structural shock to the Irish economy. In relation to our fiscal advice, our analysis indicates that the impact of fiscal policy is quite different once the economy approaches capacity limits.
In particular, the crowding out of privatesector firms if there is excessive fiscal expansion under conditions of full employment may have adverse consequences for long-term economic performance. In addition, a failure to run sufficient surpluses during phases of good economic performance may limit the ability of the government to offset adverse cyclical or structural shocks.