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Iceland: Selected Issues

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  • International Monetary Fund

Abstract

Given its small size and openness, the Icelandic economy has been subject to large shocks. Systematic coordination of monetary and fiscal policy, however, could help improve the inflation-output variability trade-off. The fiscal rule is designed to simultaneously ensure a consistently countercyclical fiscal stance and achieve a stable public debt target. The parameter values of the model are estimated from the quarterly data using a Bayesian technique. To assess how the introduction of the fiscal policy changes the inflation-output variability trade-off in Iceland, the paper compares the efficiency policy frontiers.

Suggested Citation

  • International Monetary Fund, 2006. "Iceland: Selected Issues," IMF Staff Country Reports 2006/297, International Monetary Fund.
    • Handle: RePEc:imf:imfscr:2006/297
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    References listed on IDEAS

    as
    1. Mr. Jorge A Chan-Lau & Mr. Toni Gravelle, 2005. "The END: A New Indicator of Financial and Nonfinancial Corporate Sector Vulnerability," IMF Working Papers 2005/231, International Monetary Fund.
    2. Mr. Gianni De Nicolo & Alexander F. Tieman, 2006. "Economic Integration and Financial Stability: A European Perspective," IMF Working Papers 2006/296, International Monetary Fund.
    3. Mr. Jorge A Chan-Lau, 2003. "Anticipating Credit Events Using Credit Default Swaps, with An Application to Sovereign Debt Crises," IMF Working Papers 2003/106, International Monetary Fund.
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    Cited by:

    1. Erik Larson, 2017. "Demand for credit, international financial legitimacy, and vulnerability to crises: Regulatory change and the social origins of Iceland's collapse," Regulation & Governance, John Wiley & Sons, vol. 11(2), pages 185-202, June.

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