7 page Econ Paper

OVERVIEW

Small country (pop. 320,000)

Not part of the European Union

Country with its own currency – Icelandic Krona

Key industries include fish processing, aluminum smelting, geothermal power,

hydropower

Fishing industry makes up 40% of merchandise export earnings, more than 12% of

GDP, and approximately 5% of the work force

Fish and related products, aluminum, etc. are some of the main exports

Expanding into manufacturing and service industries – tourism, software production,

and biotechnology

FINANCIAL CRISIS

Privatization of banks in the early 2000’s lead to aggressive expansion into

foreign markets and excessive consumer and business borrowing in foreign

currencies

Global conditions worsened and resulted in the ISK depreciating

The three largest banks had assets totaling 10x the country’s GDP

Iceland’s banks were highly invested in international banking

Banks collapsed

International hedge funds bought claims for cents on the dollar – effectively

owning a significant portion of Iceland’s financial system

RECOVERY STEPS

IMF rescue – $10 Billion in loans

Capital Controls on foreign currency and stock imposed in 2008 and lifted

2017

Buying back frozen ISK assets at a discounted rate

Since wages fell, Iceland did not take as hard of a hit on unemployment

rate as other European countries

Tourism started booming in 2010

Employment opportunities increased with tourism

OUTCOME

Unemployment is under 3%

Overall growth in GDP since crisis

Stabilizing ISK

Less Investment

Inflated domestic asset prices (house prices increased by about 16% in a year)

may be a result of stopping investment abroad

As of 2017 with capital controls lifted, pension and investment funds can be

invested abroad

As of 2017, interest rates at 5%

Lowering the attraction than previously present (40% of money in no interest acct

for at least a year)

Most macroeconomic indicators have rebounded to pre-crisis levels, driven

primarily by the capital controls and growth in tourism

I included the following graphs. For the paper, I need to include the graphs for the other data I sent and specifically pointed out in previous email. I can do the graphs quickly so don't worry with making graphs - just talk to the data where relevant.

Iceland Real GDP (USD, Billions)

Real GDP (% Change)

Unemployment Rates (% of total labor force)

Total Investment (% of GDP)

Iceland Inflation (% Change)