Gambling for resurrection in Iceland

Friðrik Már Baldursson, Richard Portes, 6 January 2014

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The demise of the three large Icelandic banks, just after the fall of Lehman Brothers, was a key event in the spread of the financial crisis. A couple of weeks before its collapse in October 2008, Kaupthing bank announced that the Qatari investor Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani had bought a 5.01% stake. This briefly boosted market confidence in Kaupthing (Financial Times 2008).

Topics: Financial markets
Tags: banking, banks, financial crisis, gambling for resurrection, Iceland, moral hazard

Capital controls and the resolution of failed cross-border banks: The case of Iceland

Friðrik Már Baldursson, Richard Portes, 12 November 2013

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A large amount of carry trade was drawn to Iceland in the boom leading up to the crisis of early October 2008 (Danielsson and Arnason 2011, Baldursson and Portes 2013a). As pressure mounted on the Icelandic banks, investors increasingly chose to exit the krona, which depreciated by 25% during the week before the banks collapsed. As the banks went down, the krona depreciated even further.

Topics: Europe's nations and regions, Global crisis
Tags: capital controls, cross-border banks, Iceland

Iceland’s post-Crisis economy: A myth or a miracle?

Jon Danielsson, 21 May 2013

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When the Global Crisis struck in September 2008, all eyes were on the US (Eichengreen and Baldwin 2008). Iceland, however, was the first country to really suffer. Its three major banks collapsed in the same week in October 2008, and it became the first developed country to request assistance from the IMF in 30 years.

Topics: Global crisis
Tags: Eurozone crisis, Iceland

Deposit insurance after Iceland and Cyprus

Anne Sibert, 2 April 2013

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The facts are now well known. The largest banks in Cyprus are insolvent, but too big for the government of Cyprus to save – at least if it wanted to avoid the ‘double drowning’ fate of Ireland. The government, trying to rescue banks, found itself needing a rescue.

Topics: EU institutions, Financial markets, Macroeconomic policy
Tags: bail-ins, bank bailouts, Cyprus, deposit insurance, Iceland

The capital controls in Cyprus and the Icelandic experience

Jon Danielsson, 28 March 2013

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The Cypriot government, European authorities and the IMF have concluded that capital controls are the best way to prevent a total collapse of the Cypriot financial system. Motivated by the obvious fear that anybody with money left over in Cyprus will seek to take their money out as soon as possible, temporary capital controls are to be put in place to prevent this.

Topics: EU institutions, Macroeconomic policy
Tags: capital controls, Cyprus, Eurozone crisis, Iceland

Constitution making in action: The case of Iceland

Thorvaldur Gylfason, 1 November 2012

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Strangely, democratic states often allow tiny minorities to get away with murder by exploiting the masses, big time. In Europe and the US, there is presently a fairly widespread feeling that this is what many bankers have done (Johnson and Kwak 2010). So let’s begin with a counterfactual thought experiment.

Topics: Politics and economics
Tags: constitutions, Iceland

Finance and constitutions

Thorvaldur Gylfason, 11 April 2012

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In his 2009 book, The Regulatory Response to the Financial Crisis, Charles Goodhart discusses the financial crisis, what went wrong, and what needs to be done (Goodhart 2009). The standing assumption is that regulatory reforms will rest at their current level of law, namely regulatory bodies and rules approved by lawmakers.

Topics: Global crisis, International finance
Tags: Eurozone crisis, financial regulation, Iceland

Capital controls are exactly wrong for Iceland

Jon Danielsson, Ragnar Arnason, 14 November 2011

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There is a curious difference between how foreign and local economists see the wisdom of capital controls in Iceland. In a recent IMF-government of Iceland conference1, two Nobel Prize winners in economics, along with senior IMF representatives, expressed strong support for the capital controls.

Topics: Europe's nations and regions, Global crisis, International finance
Tags: capital controls, Iceland, IMF

Iceland’s programme with the IMF 2008–11

Friðrik Már Baldursson, 8 November 2011

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When Iceland’s three main banks collapsed on 7–9 October 2008 it became obvious that Iceland would suffer a balance-of-payments crisis unless it could get outside support. A currency crisis was already under way (Figure 1). After some initial doubts it became clear to the government that it had no other option than to seek help from the IMF.

Topics: Europe's nations and regions
Tags: capital controls, global crisis, Iceland, IMF

Was the IMF programme in Iceland successful?

Jon Danielsson, 27 October 2011

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Iceland has just become the first industrialised country to graduate from an IMF programme in over 30 years. The IMF claims the programme has been an unqualified success:

Topics: Europe's nations and regions, Global crisis
Tags: global crisis, Iceland, IMF

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