Iceland is recovering after a severe crisis, which is an impressive turnaround by any standard. However, the improvement of the economy has led to a rising wage growth, which, if it continues, may lead to another boom-bust cycle. Persistent high wage growth is likely to induce the central bank...

International comparisons show that countries with co-ordinated wage setting generally have lower unemployment than countries with less co-ordinated wage setting. This paper argues that the monetary regime may affect whether co-ordination among many wage setters is feasible. A strict monetary...