Iceland: Selected Issues Paper

March 13, 2015

Preview Citation

Format: Chicago

Iceland: Selected Issues Paper, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Summary

This Selected Issues paper examines implications of capital account liberalization in Iceland. Capital controls were critical in 2008 to avoid a more severe collapse of the Icelandic economy. Six years later, capital inflows have been liberalized, but most outflows remain restricted. Iceland has used the breathing room to reduce flow and stock vulnerabilities, strengthen institutions, and prepare for the lifting of capital controls. Simulations using the central bank’s Quarterly Macroeconomic Model (QMM) suggest that, compared with the 2008 crisis episode, the economy can better withstand the impact of an abrupt removal of capital controls. However, the outcome would be dependent on a number of factors, including resident depositor behavior.

Subject: Expenditure, Fiscal policy, Housing prices, National accounts, Personal income tax, Prices, Private savings, Taxes

Keywords: CR, Credit condition, Current account balance, East Asia, Europe, FCI component, Financial crisis, Global, Housing prices, Iceland, Investment, ISCR, Personal income tax, Private savings, Saving, Saving rate, Statistics Iceland

Publication Details

Pages:

63
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2015/073
Stock No:

1ISLEA2015002
ISBN:

9781498365437
ISSN:

1934-7685

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