Lars Jonung
Professor emeritus
Iceland should replace its central bank with a currency board
Författare
Summary, in 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.
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.
Avdelning/ar
- Nationalekonomiska institutionen
Publiceringsår
2018-11-14
Språk
Engelska
Publikation/Tidskrift/Serie
Working papers
Issue
2018:5
Dokumenttyp
Working paper
Ämne
- Economics
Nyckelord
- monetary policy
- inflation targeting
- currency board
- iceland
- Central Bank
Status
Published