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Optimal Exchange Rate Policy: The Case of Iceland

Author

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  • Már Guðmundsson
  • Thórarinn G. Pétursson
  • Arnór Sighvatsson

Abstract

This paper analysis the appropriate exchange rate arrangement for Iceland, given its structural characteristics, on the one hand, and the need for a credible nominal anchor for monetary policy, on the other. It also discusses the current regime of a currency peg, its rationale, its success in terms of achieving its goals, and how the apparent conflict between the exchange rate arrangement suggested by the structural characteristics of the economy and the arrangement actually chosen, has been resolved. Finally, the paper provides an assessment of alternative future exchange rate regimes.

Suggested Citation

  • Már Guðmundsson & Thórarinn G. Pétursson & Arnór Sighvatsson, 2000. "Optimal Exchange Rate Policy: The Case of Iceland," Economics wp08, Department of Economics, Central bank of Iceland.
  • Handle: RePEc:ice:wpaper:wp08
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    References listed on IDEAS

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    Cited by:

    1. Bjarni G. Einarsson & Kristófer Gunnlaugsson & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2016. "The long history of financial boom-bust cycles in Iceland - Part II: Financial cycles," Economics wp72, Department of Economics, Central bank of Iceland.
    2. Shimotsu, Tor, 2002. "Small Open Economy Model with Domestic Resource Shocks: Monetary Union vs. Floating Exchange Rate," Economics Discussion Papers 8841, University of Essex, Department of Economics.
    3. Ágeir Daníelsson & Lúdvík Elíasson & Magnús F. Gudmundsson & Björn A. Hauksson & Ragnhildur Jónsdóttir & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2006. "QMM A Quarterly Macroeconomic Model of the Icelandic Economy," Economics wp32, Department of Economics, Central bank of Iceland.
    4. Bjarni G. Einarsson & Kristófer Gunnlaugsson & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2015. "The long history of financial boom-bust cycles in Iceland - Part I: Financial crises," Economics wp68, Department of Economics, Central bank of Iceland.

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