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Re-visiting Iceland – Options for monetary and currency reform in Iceland

Earlier this week I re-visited Iceland on the invitation of the Icelandic bank Islandsbanki. I had been invited to give a presentation on the topic of “Options for monetary and currency reform in Iceland” after the expected lifting of capital controls.

I ended up giving numerous interviews to the Icelandic media as well.

My main message in my presentations and interviews that Iceland needs monetary and currency reform to ensure nominal stability. My view presentations and interviews centered on the need for a “monetary constitution” for Iceland – either in the form of a strict rule-based monetary policy within the present currency set-up or monetary “outsourcing” through a currency board or outright dollarization.

I warned against euro adoption (which seems completely unrealistic given the fact Iceland is not an EU member and given the present euro crisis) and I equally warned against old style fixed exchange rate regime as the worst thinkable “halfway-house” between a sovereign monetary policy and complete monetary outsourcing.

Here are some links to these presentations and interviews:

The main presentation – “Iceland after Currency Controls” (my part starts after 15:10)

A wrap-up interview on my presentation (with Björn Berg Gunnarson)

Another interview with Björn Berg Gunnarson – about the Russian economy.

An interview with the Icelandic newspaper Viðskiptablaðiðpart 1 and part 2

An interview with Þorbjörn Þórðarson on visir.is

Needless to say I greatly enjoyed once again visiting Iceland – a country that I have visited often since I in 2006 co-authored a rather critical research paper – Geyser crisis – on the outlook for the Icelandic economy.

Thanks to all my friends in Iceland!

—-

Information for non-Icelanders: Sedlabanki is the Icelandic central bank, Bjarni “Ben” Benediktsson is the Icelandic Minister of Finance and Stjarnan FC is my favourite Icelandic football team. Stjarnan won its first Icelandic championship in 2014 and had great success in the European cup (UEFA Europa League) by beating among other Scottish Motherwell and Polish Lech Poznan.

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2 Comments

  1. Good one Lars, some countries deserve to use the straitjacket, it is the only remedy for credibility, that jacket serves as a formidable fiscal discipline. About 15 years ago I proposed the same recipe in Venezuela, most of economist, did not like it, same for politicians, they hate fiscal and monetary discipline. Have a look to Venezuela today Lars, people make long lines and spend days to buy milk, oil chicken, the government deficit is already about 30% of GDD and hiperinflation is on three digits
    Alexander

    Reply
  2. Good one Lars, some countries deserve to use the straitjacket, it is the only remedy for credibility, that jacket serves as a formidable fiscal discipline. About 15 years ago I proposed the same recipe in Venezuela, most of economist, did not like it, same for politicians, they hate fiscal and monetary discipline. Have a look to Venezuela today Lars, people make long lines and spend days to buy milk, oil chicken, the government deficit is already about 30% of GDD and hiperinflation is on three digits
    Alexander

    Reply

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