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Iceland should replace its central bank with a currency board

Andersson, Fredrik N G LU and Jonung, Lars LU (2018) In Working papers
Abstract
Since its independence in 1918, Iceland has tried a number of monetary regimes. They have all failed to provide monetary stability. Iceland is too small to conduct an independent monetary policy. What should Iceland do? We arrive at the conclusion that a currency board with the euro as the reserve currency is the best choice. A currency board delivers monetary stability through exchange rate stability. In contrast, a flexible exchange rate for Iceland serves as a chock amplifier. However, a currency board requires domestic reforms preferably before it is established to enhance price and wage flexibility as well as proper regulations of the financial system to minimize the risk of future financial crises.

Abstract (Swedish)
Since its independence in 1918, Iceland has tried a number of monetary regimes. They have all failed to provide monetary stability. Iceland is too small to conduct an independent monetary policy. What should Iceland do? We arrive at the
conclusion that a currency board with the euro as the reserve currency is the best choice. A currency board delivers monetary stability through exchange rate stability. In contrast, a flexible exchange rate for Iceland serves as a chock amplifier. However, a currency board requires domestic reforms preferably before it is established to enhance price and wage flexibility as well as proper regulations of the financial system to minimize the risk of future financial crises.
Please use this url to cite or link to this publication:
author
and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
monetary policy, inflation targeting, currency board, iceland, Central Bank
in
Working papers
issue
2018:5
language
English
LU publication?
yes
id
ffd689cc-1f1d-4bcd-b138-2dbe2699e5ec
date added to LUP
2018-11-14 11:51:39
date last changed
2019-06-17 09:01:38
@misc{ffd689cc-1f1d-4bcd-b138-2dbe2699e5ec,
  abstract     = {Since its independence in 1918, Iceland has tried a number of monetary regimes. They have all failed to provide monetary stability. Iceland is too small to conduct an independent monetary policy. What should Iceland do? We arrive at the conclusion that a currency board with the euro as the reserve currency is the best choice. A currency board delivers monetary stability through exchange rate stability. In contrast, a flexible exchange rate for Iceland serves as a chock amplifier. However, a currency board requires domestic reforms preferably before it is established to enhance price and wage flexibility as well as proper regulations of the financial system to minimize the risk of future financial crises.<br/><br/>},
  author       = {Andersson, Fredrik N G and Jonung, Lars},
  language     = {eng},
  month        = {11},
  note         = {Working Paper},
  number       = {2018:5},
  series       = {Working papers},
  title        = {Iceland should replace its central bank with a currency board},
  year         = {2018},
}