. finally, it is important to appreciate that many factors influence the dynamics of house prices. moreover, there is no fixed relation between credit conditions and the evolution of house prices : the importance of credit conditions is clearly diminished in settings in which a significant proportion of purchasers do not require mortgage finance. while rising incomes, low interest rates, high rents and post - crisis adjustment dynamics are currently contributing to significant house price pressures, the prospect of future expansion in housing supply should restrain house prices over the medium term. in particular, an expansion in the housing stock would simultaneously relieve pressure in both the rental and home ownership categories. in addition, as discussed earlier, the highly - open nature of the irish economy means that income and employment levels are highly sensitive to external shocks. for instance, slowdowns in global output growth, major currency movements, adverse shifts in international trading regimes and a tightening in funding conditions could trigger a reversal in the currently benign growth and employment environment. given these considerations, there are no one - way bets in the housing market and our macroprudential framework is fundamental to mitigating these risks. a resilient macro - financial system also depends on stable public finances, especially in view of 3 / 5 bis central bankers'speeches the feedback loops between fiscal stability, financial stability and macroeconomic stability. in terms of the public finances, a long - term public debt target can provide an important anchor. indeed, the greater the commitment to attaining a long - term debt target, the more is it possible to run a flexible, counter - cyclical fiscal policy in response to temporary shocks. the case for a prudent target for public debt is further reinforced by the trend implications of an ageing population for expenditure on pensions and healthcare. while the european fiscal framework prescribes a target ceiling for the stock of public debt ( at 60 percent of gdp ), there are compelling reasons to develop a national target for the stock of public debt. in this respect, i welcome the commitment in the summer economic statement to maintain a long - term debt target of 45 percent of gdp. at the most basic level, the new cso calculations indicate that the underlying size of the irish economy ( as captured by gni * ) is about one - third smaller than gdp, such that a debt ratio of 60 percent of gni * maps to a debt ratio of 40 percent of gdp. more generally, the prudent stock of public debt naturally varies across countries in line with different risk exposure

given the dominant role of global firms in our tradable sector. in addition, the legacy of high public and private sector debt levels means that ireland is vulnerable to shifts in funding conditions. the low interest rate environment that has persisted in recent years has generated a positive financial terms of trade shock for debtors. in the other direction, any upward shifts in policy rates, term premia or risk premia will pose adjustment challenges for indebted sectors and may have a material impact on asset valuations. finally, disorderly versions of brexit would disproportionately affect ireland relative to other european economies. as the eu - uk negotiations proceed, scenarios in which trading frictions between the eu and uk are increased would be damaging for the productivity of the irish economy. 1 / 5 bis central bankers'speeches macro - financial risk management : policy issues there are two basic elements in macro - financial risk management. first, the capacity to withstand adverse shocks is enhanced by improving the resilience of the macro - financial system through the strengthening of sectoral balance sheets and the design of a legal and regulatory architecture that lowers the costs associated with dealing with unsustainable debts and failing institutions. second, counter - cyclical policy measures can dampen cyclical fluctuations in conditions. at global, european and domestic levels, financial regulatory reforms in recent years have been directed at improving the resilience of banking systems. banks are now required to satisfy tougher capital and liquidity requirements, while recovery and resolution regimes have been introduced to make it easier to deal with distressed institutions. these regulatory reforms are backed by a more intrusive supervisory system, including more extensive on - site inspections and enhanced enforcement powers. legal systems have also been reformed to improve insolvency frameworks, even if much remains to be done. in addition, under the domestic implementation of the european macroprudential policy framework, the central bank of ireland now sets additional capital buffers for banks and also specifies borrower - based measures to mitigate the risks associated with boom - bust financial cycles. in relation to capital ratios, the bank sets an additional buffer for each systemically - important institution ( the so - called o - sii buffer ). 1 in addition, the counter - cyclical capital buffer ( ccyb ) is a policy tool that can be activated in response to cyclical credit dynamics by raising the minimum capital ratio for banks during periods of above - normal credit growth and lowering it during periods