Exchange Rate Arrangements of Microstates: General Assessment and the Case of Iceland*
This paper analysis the choice of exchange rate regimes in microstates. It is found that the optimal currency area criteria have important limitations. Microstates should have a tendency to have a fixed exchange rate and that is confirmed by the data. The experience of Iceland is analysed in some de...
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Text |
| Language: | English |
| Published: |
2002
|
| Subjects: | |
| Online Access: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.500.9678 http://www.cid.harvard.edu/archive/events/docs/exchange_rate.pdf |
| Summary: | This paper analysis the choice of exchange rate regimes in microstates. It is found that the optimal currency area criteria have important limitations. Microstates should have a tendency to have a fixed exchange rate and that is confirmed by the data. The experience of Iceland is analysed in some detail. Iceland was in a monetary union at the beginning of the 20th centuary but begins the 21st with a floating exchange rate. The problems with the new regime and some future alternatives are discussed. The question about the optimality of Iceland sustaining an independent currency is still unanswered. |
|---|