Iceland: Selected Issues

International Monetary Fund

No 2006/297, IMF Staff Country Reports from International Monetary Fund

Abstract: Given its small size and openness, the Icelandic economy has been subject to large shocks. Systematic coordination of monetary and fiscal policy, however, could help improve the inflation-output variability trade-off. The fiscal rule is designed to simultaneously ensure a consistently countercyclical fiscal stance and achieve a stable public debt target. The parameter values of the model are estimated from the quarterly data using a Bayesian technique. To assess how the introduction of the fiscal policy changes the inflation-output variability trade-off in Iceland, the paper compares the efficiency policy frontiers.

Keywords: ISCR; CR; reaction function; inflation-output variability trade-off; countercyclical fiscal policy; output-inflation variability tradeoff; Icelandic bank; Credit risk; Stocks; Loans; Inflation; Global (search for similar items in EconPapers)
Pages: 46
Date: 2006-08-08
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Citations: View citations in EconPapers (1)

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