IMF Staff Country Reports

Iceland: Selected Issues

Publication Date:

August 8, 2006

Electronic Access:

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Summary:

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.

Series:

Country Report No. 2006/297

Subject:

Banking Credit risk Financial institutions Financial regulation and supervision Fiscal policy Inflation Loans Output gap Prices Stocks