| Summary: | This paper describes the Stand-By Arrangement for Iceland under the Emergency Financing Mechanism. The crisis is producing a sharp contraction of economic activity. Indicators of consumption are plummeting, and the deterioration in the labor market is accelerating, with rising unemployment and falling real wages contributing to a considerable contraction in real incomes. Significant import compression is under way, allowing a sustained turnaround in the trade balance, as exports continue to benefit from a weaker króna. The króna interbank market is inactive, and equity markets remain under pressure with trade being thin. Banking sector;Capital markets;Emergency financing mechanism;Exchange rate regimes;Economic indicators;Financial sector;Financial crisis;Monetary policy;Iceland;Fiscal policy;Stand-by arrangement reviews;central bank, foreign exchange, banking, external debt, recapitalization
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