Iceland; Selected Issues
This Selected Issues paper analyses the impact of a potential rebalancing of Icelandic residents’ investment portfolios as capital controls are lifted. It applies optimal portfolio theory to calculate the potential rebalancing toward foreign assets, and then makes an estimate of the cumulative impact on the balance of payments and international reserves. Conclusions for the authorities’ capital account liberalization strategy are drawn. This paper also measures the potential budgetary savings from improving the efficiency of public spending in health and education in Iceland. A Data Envelopment Analysis is used to estimate an efficiency frontier by comparing across Organization for Economic Cooperation and Development countries the transformation rates of public spending into valuable social outcomes.
Year of publication: |
2013-08-07
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Institutions: | International Monetary Fund (IMF) ; International Monetary Fund |
Subject: | Capital controls | Balance of payments | Reserves | Government expenditures | Health care | Education | Selected issues | Iceland | capital outflows | pension | pension funds | capital account liberalization | capital controls | foreign portfolio investment | management of capital flows | capital inflows | capital flows | domestic securities | pension fund | capital outflow | domestic bonds | pension system | foreign security | foreign securities | capital account transactions | government securities | risk aversion | government bonds |
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