The Danger of a â€œGeyser Diseaseâ€ Effect: Structural Fragility of the Tourism-Led Recovery in Iceland
Francesco Macheda and
Review of Radical Political Economics, 2020, vol. 52, issue 1, 50-76
The fall of the Icelandic economy in 2008 highlighted the destructive effects of unbridled markets. Yet, in recent years Icelandâ€™s annual growth rates have been significantly higher than those of the overwhelming majority of advanced capitalist countries. The aim of this article is to delve into the fragile foundations that the current Icelandic economic boom rests on. We argue that the impressive appreciation of the Icelandic krÃ³na, triggered by the rapid expansion of tourism, has made the rapid absorption of unemployment compatible with price stability during the recovery period. By restricting sources of international competitiveness, however, this tourism-led recovery strategy will render the current level of unemployment and real wages inconsistent with internal and external equilibrium in the long run. JEL classification : E24, F31, J24, O33, B51
Keywords: natural rate; wage; real exchange rate; high skilled; Marxian (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:reorpe:v:52:y:2020:i:1:p:50-76
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