IMF Working Papers

Stabilizing Inflation in Iceland

By Keiko Honjo, Benjamin L Hunt

November 1, 2006

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Keiko Honjo, and Benjamin L Hunt. Stabilizing Inflation in Iceland, (USA: International Monetary Fund, 2006) accessed December 11, 2024
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.

Subject: Fiscal policy, Fiscal stance, Inflation, Inflation targeting, Output gap

Keywords: Inflation-output variability trade-off, WP

Publication Details

  • Pages:

    35

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2006/262

  • Stock No:

    WPIEA2006262

  • ISBN:

    9781451865226

  • ISSN:

    1018-5941