In the opening chapter of the IMF’s World Economic Outlook report, the short term effects of Ireland’s 2008 bank guarantee, which exposed the State to increased public indebtedness, and Greece’s 2012 sovereign debt restructuring, which reduced public indebtedness, are compared.

The analysis finds that in the days after the bank guarantee in September 2008, Irish banks' share prices benefited but that other Irish companies suffered abnormally bad stock market performance. In Greece, by contrast, in the days after the de facto default on sovereign debt in 2012, banks suffered abnormally poor share price changes while the remainder of the Greek corporate sector did better.

The brief analysis is given considerable prominence as it is included in the first chapter of the IMF’s flagship World Economic Outlook publication.

Speaking to The Irish Times last evening an IMF source said that the brief analysis was “a step in the research agenda that seeks to better understand the channels by which debt overhangs interact with activity across different sectors in an economy”.

Economists have limited understanding of the relationship between public indebtedness and economic growth. While one frequently cited study found that debt levels above 90 per cent of gross domestic product tend to retard economic growth, the IMF’s latest analysis raises questions about this finding.

Writing in the new report the fund’s economists find that countries with high but falling debt ratios grew faster than countries with lower but increasing debt ratios.

The study concluded by saying that available research and evidence does not allow for definitive conclusions on the impact of changes in debt levels on long term economic growth.