Leprechaun economics and the GNI* adjustment

In 2015, Ireland's real GDP jumped by an extraordinary 25.2 percent, wildly out of line with the already-strong 8.6 percent recorded in 2014, as several large multinationals relocated intellectual property, aircraft-leasing fleets and corporate domiciles into Irish subsidiaries for tax purposes. The episode, nicknamed 'leprechaun economics' in the financial press, exposed how little headline GDP now reflected activity actually available to Irish households, since multinational profits largely flow back out of the country rather than funding domestic consumption or investment. Central Bank of Ireland governor Philip Lane argued in a 2018 lecture that standard national accounts had become an unreliable guide to the real Irish economy, reviving a long-standing practice of favouring gross national income over GDP and backing a new modified measure, GNI*, that strips out depreciation on foreign-owned intellectual property, aircraft-leasing income and redomiciled firms' profits. GNI* has since become the preferred yardstick for assessing Ireland's debt sustainability and the underlying pace of growth, running persistently well below headline GDP.