IDEAS home Printed from https://ideas.repec.org/a/bic/journl/v13y2013i1p31-48.html
   My bibliography  Save this article

Small states and big banks – the case of Iceland

Author

Listed:
  • Hilmar Þór Hilmarsson

    () (School of Business and Science, University of Akureyri)

Abstract

The Icelandic economy was hit hard by the global economic and financial crisis that started in the fall of 2008. During this crisis the three largest banks all collapsed and many other smaller banks and companies went bankrupt in the aftermath of the crisis with severe consequences for the economy and the people. Prior to the crisis, Iceland, a high income economy, had experienced strong growth rates and unprecedented expansion in overseas investment and activities, especially in the financial sector. This article focuses on action by top government officials during this expansion as well as during and after the collapse of the Icelandic banks. The findings of the study are that the government showed negligence and made mistakes by not taking credible action to manage risks following a rapid cross border expansion of the Icelandic banking system. This had severe consequences and resulted in the collapse of the Icelandic economy in October 2008. The discussion can have a wider relevance than that for Iceland only. This is especially true for small countries with a large banking sector, using their own currency, and with limited fiscal space to support their banks during a crisis.

Suggested Citation

  • Hilmar Þór Hilmarsson, 2013. "Small states and big banks – the case of Iceland," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(1), pages 31-48, July.
  • Handle: RePEc:bic:journl:v:13:y:2013:i:1:p:31-48
    as

    Download full text from publisher

    File URL: http://biceps.org/assets/docs/bje/bje2013_no1/Policy_paper_2
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hilmar Tór HILMARSSON, 2014. "Managing the Crisis in Iceland and the Dishonesty of the International Community?," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(5), pages 601-612, December.
    2. Hilmar Tór HILMARSSON, 2016. "Iceland, economic integration and the European Union," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 17(4), pages 373-391, October.
    3. Hilmar Tór HILMARSSON, 2014. "Managing Financial Crisis: The Case of Iceland and Latvia," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(2), pages 200-214, May.

    More about this item

    Keywords

    Economic and financial crisis; economic policy; international expansion of firms; risk management;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:13:y:2013:i:1:p:31-48. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lelde Jakobsone). General contact details of provider: http://edirc.repec.org/data/biceplv.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.