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Europe > Iceland

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Cover IMF Working Papers
Housing Boom and Headline Inflation: Insights from Machine Learning
Yang Liu
,
Di Yang
, and
Mr. Yunhui Zhao
Inflation has been rising during the pandemic against supply chain disruptions and a multi-year boom in global owner-occupied house prices. We present some stylized facts pointing to house prices as a leading indicator of headline inflation in the U.S. and eight other major economies with fast-rising house prices. We then apply machine learning methods to forecast inflation in two housing components (rent and owner-occupied housing cost) of the headline inflation and draw tentative inferences about inflationary impact. Our results suggest that for most of these countries, the housing components could have a relatively large and sustained contribution to headline inflation, as inflation is just starting to reflect the higher house prices. Methodologically, for the vast majority of countries we analyze, machine-learning models outperform the VAR model, suggesting some potential value for incorporating such models into inflation forecasting.
Keywords:
Housing Price Inflation; Rent; Owner-Occupied Housing; Machine Learning; Forecast; machine-learning model; machine learning method; housing boom; D. forecasting result; Inflation; Housing prices; Housing; Consumer price indexes; Global; Europe; Australia and New Zealand; North America; Caribbean; VAR model
Cover IMF Staff Country Reports
Iceland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper on Iceland analyzes housing market risks and housing affordability. House prices in Iceland have increased markedly since the onset of the coronavirus disease-pandemic, with signs that the valuations have exceeded macro fundamentals and long-term trends. Overvaluation has important implications for macroeconomic and financial stability, and housing affordability. House price cycles seem to be closely linked with the business cycle, indicating an amplification risk in the event of price correction. Thus, well calibrated and coordinated policies are crucial to navigate the house price cycle, minimize adverse feedbacks, and reduce affordability risk. IMF’s quantitative analysis examines the interplay between house prices and related factors. The ongoing monetary policy tightening cycle should help address Iceland’s house price pressures. Further macroprudential tightening through binding and effective borrower-based measures could help contain systemic risks and create further buffers in the financial sector. In the medium term, focusing on structural measures that reduce construction costs and increase supply by eliminating red-tape and reducing the period for obtaining building permits is likely to have the highest pay-off.
Keywords:
housing affordability; D. containing housing market; C. informing housing market policy; Energy exchange transition; I. carbon absorption; Housing prices; Greenhouse gas emissions; Carbon tax; Housing; Global
Cover IMF Staff Country Reports
Iceland: 2022 Article IV Consultation - Press Release; and Staff Report
International Monetary Fund. European Dept.
This 2022 Article IV Consultation discusses that Iceland has weathered recent shocks to the economy relatively well. Well-designed policy measures and a solid health system eased the impact of the pandemic, allowing real gross domestic product and employment to recover strongly. Robust domestic demand and favorable terms of trade boosted output growth to 4.3 percent in 2021, despite slower recovery in tourism. Growth is expected to remain moderate in 2022 and the medium term. Careful policy coordination is required to entrench the recovery, stem risks and rebuild buffers to pre-pandemic levels. Policies should mitigate the flaring-up in inflation, external imbalances, and house prices. Structural reforms should facilitate economic diversification and make the economy more resilient to shocks. Diversification efforts should focus on easing regulatory burdens on start-ups and spurring innovation by leveraging Iceland’s human capital and advanced digital infrastructure. The new collective wage agreement can also foster diversification and resilience through better alignment of wage and productivity growth.
Keywords:
inflation expectation; liability positions vis-à-vis nonresident; steering inflation; housing policy; data standard; rising prices; policy coordination; Inflation; Housing prices; Housing; Government finance statistics; Central bank policy rate; Global
Cover Policy Papers
2021 Comprehensive Surveillance Review— Background Paper on Traction
International Monetary Fund. Strategy, Policy, & Review Department
This paper presents traction as a multidimensional concept and discusses a comprehensive and complementary set of approaches to attempt to measure it based on the Fund’s value added to policy dialogue and formulation and public debate in member countries.
Keywords:
article IV advice; fund policy advice; fund advice; policy dialogue; IMF's transparency policy; COVID-19; Income; Financial Sector Assessment Program; Financial sector stability; Machine learning; Global
Cover Policy Papers
G20 Note On Environmentally Sustainable Investment For The Recovery
International Monetary Fund. Fiscal Affairs Dept.
This Note prepared for the G20 Infrastructure Working Group summarizes the main finding of the IMF flagships regarding the role of environmentally sustainable investment for the recovery. It emphasizes that environmentally sustainable investment is an important enabler for a resilient greener, and inclusive recovery—it creates jobs, spurs economic growth, addresses climate change, and improves the quality of life. It can also stimulate much needed private sector greener and resilient investment.
Keywords:
climate change; environmentally sustainable investment; public investment management; green infrastructure; IMF flagship; transparency policy; quality infrastructure investment agenda; energy efficiency improvement investment; management practice; Public investment and public-private partnerships (PPP); Infrastructure; Climate change; Job creation; Natural disasters; Global; Sustainable growth
Cover Staff Discussion Notes
A Post-Pandemic Assessment of the Sustainable Development Goals
Ms. Dora Benedek
,
Mr. Edward R Gemayel
,
Mr. Abdelhak S Senhadji
, and
Alexander F. Tieman
The COVID-19 pandemic hit countries’ development agendas hard. The ensuing recession has pushed millions into extreme poverty and has shrunk government resources available for spending on achieving the United Nations Sustainable Development Goals (SDGs). This Staff Discussion Note assesses the current state of play on funding SDGs in five key development areas: education, health, roads, electricity, and water and sanitation, using a newly developed dynamic macroeconomic framework.
Keywords:
Sustainable Development Goals, Development, Fiscal Policy, Structural Reform; policy option; composite index; case study countries' SDG spending; financing gap; SDG performance; analysis of development strategy; Sustainable Development Goals (SDG); COVID-19; Human capital; Emerging and frontier financial markets; Infrastructure; Sub-Saharan Africa; Global
Cover Departmental Papers
Commodity Cycles, Inequality, and Poverty in Latin America
Mr. Ravi Balakrishnan
,
Sandra Lizarazo
,
Marika Santoro
,
Mr. Frederik G Toscani
, and
Mr. Mauricio Vargas
Over the past decades, inequality has risen not just in advanced economies but also in many emerging market and developing economies, becoming one of the key global policy challenges. And throughout the 20th century, Latin America was associated with some of the world’s highest levels of inequality. Yet something interesting happened in the first decade and a half of the 21st century. Latin America was the only region in the World to have experienced significant declines in inequality in that period. Poverty also fell in Latin America, although this was replicated in other regions, and Latin America started from a relatively low base. Starting around 2014, however, and even before the COVID-19 pandemic hit, poverty and inequality gains had already slowed in Latin America and, in some cases, gone into reverse. And the COVID-19 shock, which is still playing out, is likely to dramatically worsen short-term poverty and inequality dynamics. Against this background, this departmental paper investigates the link between commodity prices, and poverty and inequality developments in Latin America.
Keywords:
latin America; Commodity Cycles; Inequality; Poverty; Equilibrium Models; commodity exporter; commodity cycle; IMF staff calculation; commodity price boom; natural resource; commodity endowment; Headcount ratio; poverty in Latin America; Income inequality; Income; Income distribution; South America; Central America; Western Hemisphere; Caribbean
Cover Financial Soundness Indicators Compilation Guide 2019
Financial Soundness Indicators Compilation Guide 2019
International Monetary Fund. Statistics Dept.

Abstract

The 2019 Financial Soundness Indicators Compilation Guide (2019 Guide) includes new indicators to expand the coverage of the financial sector, including other financial intermediaries, money market funds, insurance corporations, pension funds, nonfinancial corporations, and households. In all, the 2019 Guide recommends the compilation of 50 FSIs—13 of them new. Additions such as new capital, liquidity and asset quality metrics, and concentration and distribution measures will serve to enhance the forward-looking aspect of FSIs and contribute to increase policy focus on stability of the financial system.

Keywords:
M&G; capital; loan; foreign currency; holding company; DT subsidiary; DT sector; parent corporation; FSI compiler; regulatory capital; capital range; Financial soundness indicators; Personal income; Loans; Real estate prices; Financial statements; Global; Western Hemisphere; Middle East and Central Asia; Sub-Saharan Africa; Europe; Caribbean; real estate; Asia and Pacific
Cover IMF Staff Country Reports
Iceland: 2019 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. European Dept.
This 2019 Article IV Consultation with Iceland discusses that after years of robust growth, economic activity has significantly weakened. Supply disruptions in tourism, the engine of recent growth, and the associated uncertainty have triggered a drop in domestic demand and an increase in unemployment. A swift policy response, with fiscal relaxation and monetary easing, has stabilized expectations and cushioned the effects. A moderate but fragile growth recovery is expected in 2020. Macroprudential measures are helping to preserve buffers for managing financial stability risks. Macroprudential policies are adequate, given still elevated household debt and real-estate prices and benign external financing conditions. Looking forward, the macroprudential toolkit could be expanded to contain potential risks in the loan portfolio over the medium term. Ongoing education reforms would boost human capital and productivity, greater transparency of large unlisted companies would preserve the business environment, and strategic policies in tourism and fisheries would protect the sustainability of traditional economic sectors.
Keywords:
ISCR; CR; IMF staff country; inflation expectation; policy; Policy space; gross domestic product; policy accountability; Anti-money laundering and combating the financing of terrorism (AML/CFT); Income; Global
Cover Finance & Development
Finance & Development, March 2019
International Monetary Fund. Communications Department
This issue of Finance & Development discusses need of empowering women, which is critical for the world’s economy and people. Unequal or unfair treatment can marginalize women and hinder their participation as productive individuals contributing to society and the economy in invaluable ways. The rich tapestry of organizations and individuals who can make a difference to ensure women have equal opportunities; there is a crucial role for policymakers. They can use their positions to design policies that help women and girls’ access what they need for a fulfilling life—including education, health services, safe transportation, legal protection against harassment, finance, and flexible working arrangements. The IMF recommends these kinds of policy measures to its member countries—and works with many governments to examine how policies affect women. The IMF’s 189 member countries face many different challenges, but empowering women remains a common denominator and a global imperative for all those who care about fairness and diversity, but also productivity and growth of societies and economies that are more inclusive.
Keywords:
FD; F&D; economy; worker; gender equality; gender wrong; garment factory workforce; authorities in Africa; IMF's expertise; citizenship law; AI skill; Women; Gender inequality; Minimum wages; Gender diversity; Income inequality; Global; Africa; South Asia; Europe; Middle East; North Africa; Labor force participation; class AnalystIn; gender DiversityThe; costs of Unpaid CaregivingBanking