http://worldcat.org/entity/work/id/1882240420

Iceland selected issues paper

1. Iceland faces a significant debt sustainability challenge. The 2008 financial crisis saw Iceland's public debt soar from under 30 to over 100 percent of GDP, and while underlying external debt came down sharply (as heavily indebted banks collapsed into bankruptcy), it remains elevated at close to 300 percent of GDP. Standard debt dynamics identities link the evolution of debt to the level of interest rates and the exchange rate and the pace of economic growth. Given these macro parameters, the primary fiscal position drives public debt dynamics, while the primary current account surplus drives external debt dynamics. A key complication is that the macro parameters depend on the pace of policy adjustment. The Selected Issues Papers in this volume examine this nexus in more depth.

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