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Separating the Wheat from the Chaff: Icelandic and Irish Policy Responses to the Banking Crisis

Listed author(s):
  • David Howden

When the tales of the Icelandic and Irish crises are told, they are framed as if one country did everything right to exit recession. In this paper I assess their recovery policies and find that the truth lies somewhere in the middle. By allowing its banking system to suffer substantial losses, Iceland shielded its citizens from the costly debt overhand apparent in Ireland. Ireland’s commitment to open capital markets and price deflation has allowed trade flows to remain robust, and relative prices to realign to signal sustainable production plans to entrepreneurs. These lessons provide a roadmap for other countries entering similar crises in the future.

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File URL: http://hdl.handle.net/10.1111/ecaf.12044
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Article provided by Wiley Blackwell in its journal Economic Affairs.

Volume (Year): 33 (2013)
Issue (Month): 3 (October)
Pages: 348-360

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Handle: RePEc:bla:ecaffa:v:33:y:2013:i:3:p:348-360
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  1. Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2015. "Why Firms Avoid Cutting Wages," ILR Review, Cornell University, ILR School, vol. 68(4), pages 862-888, August.
  2. Stephen Kinsella, 2012. "Is Ireland really the role model for austerity?," Cambridge Journal of Economics, Oxford University Press, vol. 36(1), pages 223-235.
  3. Philipp Bagus & David Howden, 2011. "Monetary equilibrium and price stickiness: Causes, consequences and remedies," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 383-402, December.
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