Iceland: Selected Issues

June 22, 2016

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Format: Chicago

Iceland: Selected Issues, (USA: International Monetary Fund, 2016) accessed December 23, 2024

Summary

This paper examines Iceland’s expenditure policy, especially five expenditure pressure points, as well as capital flows and monetary policy effectiveness in small open economies. The postcrisis fiscal adjustment demanded painful choices, with spending on healthcare, education, and investment suffering cuts in real terms. While expenditures in these areas have rebounded more recently, there is a room for further decompression. Using quarterly panel data for 18 advanced and emerging small open economies during 2002–15, it finds that monetary policy is focused on inflation developments, but also that domestic interest rates affect capital flows, raising concerns about a reinforcing loop between monetary policy and capital flows.

Subject: Balance of payments, Capital flows, Capital inflows, Expenditure, Financial sector policy and analysis, Macroprudential policy, Macroprudential policy instruments

Keywords: Capital flows, Capital inflows, Cost, CR, Europe, Expenditure pressure points, GDP, Global, Health expenditure, Interest cost, ISCR, Macroprudential policy, Macroprudential policy instruments, Monetary policy, Monetary policy effectiveness, Monetary policy independence, Monetary policy stance

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2016/180
Stock No:

1ISLEA2016002
ISBN:

9781498313551
ISSN:

1934-7685

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