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Europe > Iceland

You are looking at 1 - 8 of 8 items for :

  • Type: Journal Issue x
  • Macroeconomics: Consumption; Saving; Wealth x
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Cover IMF Working Papers
Capital Controls or Macroprudential Regulation?
Mr. Anton Korinek
and
Mr. Damiano Sandri
International capital flows can create significant financial instability in emerging economies because of pecuniary externalities associated with exchange rate movements. Does this make it optimal to impose capital controls or should policymakers rely on domestic macroprudential regulation? This paper presents a tractable model to show that it is desirable to employ both types of instruments: Macroprudential regulation reduces overborrowing, while capital controls increase the aggregate net worth of the economy as a whole by also stimulating savings. The two policy measures should be set higher the greater an economy's debt burden and the higher domestic inequality. In our baseline calibration based on the East Asian crisis countries, we find optimal capital controls and macroprudential regulation in the magnitude of 2 percent. In advanced countries where the risk of sharp exchange rate depreciations is more limited, the role for capital controls subsides. However, macroprudential regulation remains essential to mitigate booms and busts in asset prices.
Keywords:
WP; exchange rate; Financial stability; pecuniary externalities; capital controls; macroprudential regulation; inequality; exchange rate depreciation; covariance term; wedge terms; marginal utility; asset price externality; exchange rate fluctuation; exchange rate effect; simplifying terms; resource constraint; asset purchase; price change; Exchange rates; Real exchange rates; Asset prices; Consumption; East Asia
Cover IMF Working Papers
Tax Revenue Response to the Business Cycle
Ms. Cemile Sancak
,
Jing Xing
, and
Ricardo Velloso
This paper examines tax revenue during the business cycle by estimating the relationship between tax revenue efficiency and the output gap. We find a positive and significant relationship between these variables; results are consistent for quarterly and annual data, and across advanced and developing economies. We also find that a worsening (improvement) in the VAT C-efficiency is driven by shifts in consumption patterns and changes in tax evasion during contractions (expansions). A key implication is that, particularly during major economic booms and downturns, policy makers should look beyond simple, long-run revenue elasticities and incorporate into their analysis the effects of the economic cycle on tax revenue efficiency.
Keywords:
WP; tax revenue; output gap coefficient; tax revenue forecasting; business cycle; tax revenue efficiency; C-efficiency; VAT elasticity; VAT C-efficiency; estimation result; output gap variable; Value-added tax; Output gap; Tax efficiency; Consumption; Baltics
Cover IMF Staff Papers
IMF Staff Papers, Volume 56, No. 3
International Monetary Fund. Research Dept.
Studies of the impact of trade openness on growth are based either on crosscountry analysis—which lacks transparency—or case studies—which lack statistical rigor. This paper applies a transparent econometric method drawn from the treatment evaluation literature (matching estimators) to make the comparison between treated (that is, open) and control (that is, closed) countries explicit while remaining within a statistical framework. Matching estimators highlight that common cross-country evidence is based on rather far-fetched country comparisons, which stem from the lack of common support of treated and control countries in the covariate space. The paper therefore advocates paying more attention to appropriate sample restriction in crosscountry macro research.
Keywords:
SP; asset-price shock; consumption growth; net capital flow; current account sustainability; current account position; Current account; Capital flows; Consumption; Current account deficits; Emerging and frontier financial markets; Global; Asia and Pacific; Middle East; Africa; Caribbean
Cover IMF Working Papers
Toward a Robust Fiscal Framework for Iceland: Motivation and Practical Suggestions
Mr. Anthony M Annett
Expenditure in Iceland, especially related to the government wage bill, has tended to move in a procyclical manner, related to the fragmentation of political decision making. Iceland's elevated macroeconomic volatility reinforces these tendencies, as large booms unleash greater fiscal pressures as well as procyclical revenue elasticities that magnify these underlying strains. To improve its fiscal framework, Iceland could look to the experience of countries like Belgium and the Netherlands. In particular, it could adopt binding nominal expenditure rules, independent forecasts, and use representative committees to lay out medium-term targets across different levels of government.
Keywords:
WP; government; wage government consumption; government fractionalization
Cover IMF Staff Country Reports
Iceland: 2007 Article IV Consultation: Staff Report; and Public Information Notice on the Executive Board Discussion
International Monetary Fund
This 2007 Article IV Consultation highlights that boom in private consumption in Iceland was facilitated by easing household credit conditions, tax cuts, rapidly rising housing and equity wealth, and an appreciating real exchange rate. As a result, the output gap peaked at over 5 percent in 2005, declining only modestly in 2006. Record current account deficits and credit downgrades early in 2007 caused little market disruption, in part reflecting a healthy financial sector. The exchange rate remained strong, and confidence in Icelandic banks stayed high.
Keywords:
ISCR; CR; anchor inflation expectation; debt; Last Article IV consultation; derivative; record current account deficit; inflation well; Eurobond carry trade; headline inflation; Loans; Fiscal stance; Private consumption; Inflation; Eastern Europe; Global
Cover IMF Staff Country Reports
Iceland: Staff Report for the 2005 Article IV Consultation
International Monetary Fund
Iceland’s 2005 Article IV Consultation reports that new projects have rekindled rapid growth and the economy is exhibiting signs of overheating, with imbalances evident in inflation, the current account, and external debt. GDP grew at an average rate of 3.8 percent between 1995 and 2004, second only to Ireland among industrial countries. Major investment projects have contributed both to the high growth rate and to overall macroeconomic volatility because of their size relative to that of the economy.
Keywords:
ISCR; CR; deficit; loan; GDP; monetary policy; inflation-targeting monetary policy framework; mortgage credit condition; data ROSC exercise; inflation stabilization task; investment project; state telecommunication company; monetary policy stance; inflation prospect; monetary policy meeting; tolerance range; Inflation; Mortgages; Loans; Housing prices
Cover IMF Working Papers
An Exploration of the Private Sector Response to Changes in Government Saving Across OECD Countries
Mr. Alun H. Thomas
Several recent papers have examined the response of national saving to changes in fiscal policy. This paper uses knowledge about the intergenerational fiscal position of a country to determine whether this information helps to explain cross country differences in the nature of the response. Using OECD data the paper finds that in countries in intergenerational fiscal balance, the private sector completely offsets fiscal policy changes whereas in other countries the private sector offset is only partial. Moreover, in countries with large intergenerational fiscal imbalances, strong fiscal consolidation packages reduce the impact of changes in fiscal policy on national saving.
Keywords:
WP; fiscal policy; intergenerational fiscal balance; Ricardian effects; national saving; saving rate; government saving; expenditure coefficient; saving position; Fiscal consolidation; Private savings; Fiscal stance; Europe
Cover IMF Staff Country Reports
Iceland: Statistical Appendix
International Monetary Fund
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
Keywords:
ISCR; CR; net; Iceland; long-term debt; central bank of Iceland; Iceland inflation; gross investment; Iceland composition; Iceland output; Exports; Public sector; Consumption; Output gap; Eastern Europe; Western Europe