Iceland’s meltdown was caused by the rapid emergence of an oversized banking sector and accompanying domestic credit creation, asset bubbles and excessive indebtedness that all this encouraged. This column draws lessons from this crisis and suggests Iceland should join the EU if it wants to stand a chance at keeping its well-educated young people from emigrating.
Gylfi Zoega, Thursday, November 27, 2008 - 00:00
Philip R. Lane, Thursday, November 6, 2008 - 00:00
Iceland is undergoing a traumatic financial crisis. This column argues that the main anchor for its recovery strategy should be EU membership and entry into the euro area.
Willem Buiter, Anne Sibert, Thursday, October 30, 2008 - 00:00
In the first half of 2008, Buiter and Sibert were invited to study Iceland’s financial problems. They identified the “vulnerable quartet” of (1) a small country with (2) a large banking sector, (3) its own currency and (4) limited fiscal capacity – a quartet that meant Iceland’s banking model was not viable. How right they were. This column summarises the report, which is now available as CEPR Policy Insight No. 26 with an October 2008 update.