Stabilizing Inflation in Iceland

Author/Editor:

Keiko Honjo ; Benjamin L Hunt

Publication Date:

November 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper provides some empirical estimates on how tightly is it feasible to control inflation in a very small open economy such as Iceland. Estimated macroeconomic models of Canada, Iceland, New Zealand, the United Kingdom, and the United States are used to derive efficient monetary policy frontiers that trace out the locus of the lowest combinations of inflation and output variability that are achievable under a range of alternative monetary policy rules. These frontiers illustrate that inflation stabilization is more challenging in Iceland than in other industrial countries primarily because of the relative magnitudes of the economic shocks.

Series:

Working Paper No. 06/262

Subject:

English

Publication Date:

November 1, 2006

ISBN/ISSN:

9781451865226/1018-5941

Stock No:

WPIEA2006262

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

35

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