Friday, October 31, 2008


Buiter and Sibert tell us why it got in to trouble. Check out the scary conclusion: Iceland’s circumstances were extreme, but there are other countries suffering from milder versions of the same fundamental inconsistent – or at least vulnerable - quartet: (1) A small country with (2) a large, internationally exposed banking sector, (3) its own currency and (4) limited fiscal spare capacity relative to the possible size of the banking sector solvency gap: Switzerland, Denmark, Sweden
Tyler Cowen wonders if Iceland is permanently bankrupt. Do we need a HIRC (Heavily Indebted Rich Countries) Initiative?

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