Iceland: Selected Issues

Author: International Monetary Fund

Volume/Issue: Volume 2005 Issue 366

Publication date: October 2005

ISBN: 9781451819298

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Inflation , Taxation - General , ISCR , CR , Iceland , mortgage market , consumption expenditure , Icelandic firm , inflation-output variability tradeoff , leverage ratio , consumption goods , excess demand pressure , rises in step , Mortgages , Inflation , Housing , Commercial banks , Housing prices , Western Europe

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Summary

This Selected Issues paper for Iceland reports that it faces a considerably less favorable inflation-output variability trade-off than do Canada or the United States. A number of measures should be considered that could help minimize the cost of inflation breaching the tolerance band and help to lower the probability of such events occurring. To effectively target inflation, central banks need to be forward looking, responding early to prospective demand pressures. Having housing prices explicitly in the target ensures that the central bank will monitor developments in the housing market closely.