IDEAS home Printed from https://ideas.repec.org/p/ris/jhisae/0045.html
   My bibliography  Save this paper

Prospects for a Currency Board in Iceland

Author

Listed:
  • Mabie, Alexander

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

In October 2008, Iceland suffered the biggest banking crisis in history relative to the size of an economy. Its three main banks, Glitnir, Kaupthing, and Landsbanki, were not able to avoid the deterioration in global financial markets following the September collapse of Lehman Brothers. Ever since, many economists have questioned whether a floating currency issued by the Central Bank of Iceland (CBI) is the most suitable monetary system for the Nordic island, or if it is time for Iceland to abandon the kroná (ISK) and adopt a new monetary regime. This paper examines the prospects of introducing several alternative monetary regimes in Iceland, namely a currency board system. In doing so, it presents a comparison of each regime’s past performance in Iceland (if applicable) and elsewhere as well as each regime’s potential effects on exchange rate dynamics. Lastly, it explores what might constitute an exchange rate that would be sustainable for a currency board.

Suggested Citation

  • Mabie, Alexander, 2016. "Prospects for a Currency Board in Iceland," Studies in Applied Economics 45, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    • Handle: RePEc:ris:jhisae:0045
    as

    Download full text from publisher

    File URL: https://sites.krieger.jhu.edu/iae/files/2017/04/Alexander_Mabie_Iceland.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Beckerman, Paul, 2001. "Dollarization and semi-dollarization in Ecuador," Policy Research Working Paper Series 2643, The World Bank.
    2. Scott Sumner, 2014. "Nominal GDP Targeting: A Simple Rule to Improve Fed Performance," Cato Journal, Cato Journal, Cato Institute, vol. 34(2), pages 315-337, Spring/Su.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. T. Gerasimos S. & V. Erotokritos & Т. Герасимос С. & В. Эротокритос, 2017. "Предварительный поведенческий подход в таргетированию реальных доходов // A Tentative Behavioral Approach to Real Income Targeting," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(1), pages 17-31.
    2. Roberto M. Billi, 2020. "Output Gaps and Robust Monetary Policy Rules," International Journal of Central Banking, International Journal of Central Banking, vol. 16(2), pages 125-152, March.
    3. Benchimol, Jonathan & Fourçans, André, 2016. "Nominal income versus Taylor-type rules in practice," ESSEC Working Papers WP1610, ESSEC Research Center, ESSEC Business School.
    4. Billi, Roberto M., 2018. "Price level targeting and risk management," Economic Modelling, Elsevier, vol. 73(C), pages 163-173.
    5. Azariadis, Costas & Bullard, James & Singh, Aarti & Suda, Jacek, 2019. "Incomplete credit markets and monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 83-101.
    6. Bhatnagar, Aryaman, 2023. "Monetary policy with non-Ricardian households," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 12-26.
    7. Soldatos, Gerasimos T. & Varelas, Erotokritos, 2017. "Firms’ rational expectations, workers’ psychology, and monetary policy in a behavioral real business cycle model," Economic Analysis and Policy, Elsevier, vol. 53(C), pages 129-139.
    8. John B. Taylor, 2017. "Rules Versus Discretion: Assessing the Debate Over the Conduct of Monetary Policy," NBER Working Papers 24149, National Bureau of Economic Research, Inc.
    9. Tim Willems, 2011. "Using Dollarized Countries to Analyze the Effects of US Monetary Policy Shocks," 2011 Meeting Papers 200, Society for Economic Dynamics.
    10. repec:beo:swcetp:23-06 is not listed on IDEAS
    11. Benchimol, Jonathan & Fourçans, André, 2019. "Central bank losses and monetary policy rules: A DSGE investigation," International Review of Economics & Finance, Elsevier, vol. 61(C), pages 289-303.
    12. Andrea Giorgio Tosato, 2022. "Considerations on the Monetary Policy Framework of the European Central Bank," CBM Working Papers WP/01/2022, Central Bank of Malta.
    13. Holland, Margaret B. & de Koning, Free & Morales, Manuel & Naughton-Treves, Lisa & Robinson, Brian E. & Suárez, Luis, 2014. "Complex Tenure and Deforestation: Implications for Conservation Incentives in the Ecuadorian Amazon," World Development, Elsevier, vol. 55(C), pages 21-36.
    14. Benchimol, Jonathan, 2024. "Central bank objectives, monetary policy rules, and limited information," Journal of Macroeconomics, Elsevier, vol. 80(C).
    15. Willems, Tim, 2013. "Analyzing the effects of US monetary policy shocks in dollarized countries," European Economic Review, Elsevier, vol. 61(C), pages 101-115.
    16. Ryan H. Murphy & Jiawen Chen, 2017. "A simple empirical investigation into the optimal size of the NGDP Target and Level targeting," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 354-369, April.
    17. Emilio Ocampo & Nicolás Cachanosky, 2023. "Dollarization dynamics: A comment," CEMA Working Papers: Serie Documentos de Trabajo. 855, Universidad del CEMA.
    18. Daniel Kaufmann, 2015. "Nominal stability and Swiss monetary regimes over two centuries," KOF Working papers 15-379, KOF Swiss Economic Institute, ETH Zurich.
    19. Salter, Alexander William & Young, Andrew T., 2018. "Would a free banking system stabilize NGDP growth?," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 21-25.
    20. Robert L. Hetzel, 2016. "A Proposal to Clarify the Objectives and Strategy of Monetary Policy," Working Paper 16-11, Federal Reserve Bank of Richmond.
    21. Vladimir Filipovski, 2023. "Alternative Theories Of Monetary Policy," Shaping Post-COVID World – Challenges for Economic Theory and Policy, in: Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.),Shaping Post-COVID World – Challenges for Economic Theory and Policy, chapter 6, pages 107-133, Faculty of Economics and Business, University of Belgrade.

    More about this item

    Keywords

    Iceland; financial crisis; currency board; dollarization; nominal GDP targeting;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    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:ris:jhisae:0045. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Steve H. Hanke (email available below). General contact details of provider: https://edirc.repec.org/data/iaejhus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.