# What does an open economy exactly mean?



## horusd (18 Jul 2011)

I heard on the weekend radio (RTE business I think), that Ireland has the 2nd most open economy in the world. Singapore is 1st. What exactly does this mean? I assume it relates to ease of doing business and export reliance, but is there more to this, and why is it important?


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## Brendan Burgess (18 Jul 2011)

What it means is the extent of imports and exports.

A closed economy would have no imports or exports. 

For an open economy like Ireland, an improvement in the overseas economy would increase demand for our products.

But on the other hand, a fiscal stimulus doesn't stimulate growth as much because much of the increased spending goes on imports.

So when you hear people saying that cutting government expenditure would destroy the economy, it's not that clear cut in Ireland's case.


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## horusd (18 Jul 2011)

Thanks Brendan, it's one of those terms bandied about like confetti, but I have to say I never fully understood it.


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