Economic Crises Case Study

Meltdown in Iceland: Biggest Casualty of the 2008 Global Financial Crisis

Abstract:
The 2008 Icelandic financial crisis was a major economic crisis in Iceland that resulted due to the collapse of its three major banks. After enjoying a brief period of prosperity, Iceland went bankrupt within a matter of months. The country is now faced with a gigantic challenge to its macroeconomic structure, with most of its banking sector nationalised due to its huge exposure to international debt and current account deficit. The case briefly details the reasons that led to the collapse of the banking sector, the role of the different elements in the downfall, and the disastrous effects of the financial crisis on Iceland's economy. In addition, it highlights the modalities of the bail out given by the International Monetary Fund. The case concludes by suggesting that the most viable option for Iceland now is to join the European Union conclave and embrace the Euro.

Pedagogical Objectives:

• To present a general idea of the Icelandic economy.
• To understand the reasons for its economic collapse.
• To analyse the remedies and the lessons to be learnt from the crisis.

Keywords :  Iceland, Financial, Crisis, Central bank, IMF (International Monetary Fund), Glitnir, Landsbanki, Kaupthing, Krona, Interest rate, Unemployment rate, Icesave, GDP (gross domestic product)