Iceland: Selected Issues

International Monetary Fund

No 2017/164, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper analyzes the explosion of tourism in Iceland, which has surged above all expectations. The number of tourists has almost quadrupled since the Eyjafjallajökull eruptions in 2010, establishing tourism at the heart of the economy. Tourists do not seem to be driven mainly by rising incomes at home, nor have they been deterred by rising costs on the back of króna appreciation—which leaves Iceland’s tourism boom largely unexplained by standard econometric models. Instead, Iceland’s natural wonders, welcoming atmosphere, general safety, improving connectedness, and social media outreach have drawn in visitors. Going forward, tourism is likely to grow less rapidly than in recent years, yet remain at strong levels.

Keywords: ISCR; CR; Iceland; bank credit growth; post GFC recovery; tourism competitiveness report; NRIR estimate; LWPRF model; macroeconomic variable; Bank credit; Tourism; Inflation; Real interest rates; Credit; Global; Europe (search for similar items in EconPapers)
Pages: 41
Date: 2017-06-22
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