Fridrik M. Baldursson explores the effects of the economic policies prescribed by the IMF in response to the Iceland crisis. He finds that the capital controls were effective in that a gap emerged between the onshore and the offshore exchange rates; domestic interest rates did not follow foreign...

Iceland's capital controls were imposed in October 2008 in order to prevent massive capital flight and a complete collapse of the exchange rate. The controls were in place for more than eight years, primarily because of the risk of large outflows of domestic holdings of the failed Icelandic...