Iceland: Financial regulation and reduction in the price of the public debt after the banking collapse in 2008

The banking system in Iceland was on the verge of total collapse in 2008

and that was the starting point of a huge economic crisis. Since then, public

debt has increased remarkably due to both the partial rescue of banks and the

financing of the public deficit that the crisis has produced. However, as time

went on, the cost of the public debt has become increasingly lower

for the Government. This paper argues that one of the most important factors to explain

this phenomenon is Government intervention in financial markets, through the

establishment of strong capital outflows regulation and the partial nationalization

of the banking sector.

Pablo Aguirre
Nuria Alonso
Attached file: 

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