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Monday, 07 November 2011 21:06

Icelandic Indexation

I've mentioned how I think the Icelandic way of indexation is doing more harm than good in Iceland but I've never actually explained how it works. So here goes. This post is not going to touch on the disastrous effects of Icelandic indexation but merely am I going to draw a rough picture of how it works in practice.

The London School of Economics (LSE) recently announced that a new research institution will be founded, called The Systemic Risk Centre. Dr. Jon Danielsson, an Icelandic professor at LSE, will be a co-director of the institution, along with Dr Jean-Pierre Zigrand.

Friday, 25 November 2011 10:48

Icelandic Indexation, Part II

In my first entry about Icelandic indexation of debt and credit, predominantly mortgages, I touched on how the cost of inflation is added onto the principal of the mortgage instead of being in the form of higher nominal rates as is the case in most other countries. The feedback I got from one of my readers was “I still don’t understand how this thing works, it looks nuts the way you describe it and it can’t be right.”

The Ministry of Finance and Economic affairs in Iceland recently reported on their website that it has handed in a Pre-Accession Economic Programme to the EU Commission. The report is a part of Iceland‘s accession process and sets out Iceland‘s main economic priorities in four main chapters.

One of Iceland's most successful economists, Dr. Gauti B. Eggertsson, has quit his job at the New York Fed and is now an Associate Professor at Brown University. He can now speak publicly about economic matters, and has started blogging at an Icelandic news website.

"Politicians from both right and left could learn from the Nordic countries", the Economist writes. The Economist recently published an article about the Nordic economic model, which they call a "supermodel". Iceland was however not included in the article.

The Croatian news site Dnevno.hr took an interview with Steinar Macro Bjornsson, editor at News of Iceland. The interview is about the conditions in Iceland after the crisis and related matters. Among topics are the peaceful revolution, bailouts, FBI agents, the EU, corruption, economic recovery and the media. The questions are asked by Mr. Zoran Stupar at Dnevno.hr

According to current laws the capital controls should be lifted by the end of 2013. The prime minister of Iceland, Ms. Johanna Sigurdardottir, recently said that the lifting of the capital controls might need to be delayed. A committee on the capital controls with members across party lines said that it would be unwise to accept the schemes of arrangement from the defaulted Icelandic banks.

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