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1
Korolev, Y. "Iceland: Lessons of Crisis." World Economy and International Relations, no. 2 (2012): 81–90. http://dx.doi.org/10.20542/0131-2227-2012-2-81-90.
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In the last decade of the XXth century Iceland became a peculiar laboratory of neoliberal ideas: the change of economic development models occured – from Scandinavian model, with dominate state participation in the economy, to Anglo-Saxon model, with liberal market regulation mechanisms, primarily in the financial sphere. Icelandic banks, which had grown on a questionable ground, suddenly failed in October 2008. The economy in general was also shaken, and Iceland turned into a textbook example of a financial bubble. The policy of Icelandic government just before and during the crisis is thoroughly analyzed in the article, the crisis recovery program, prospects of transition to the innovation model of the country's economy and interrelations between Iceland and the EU are laid out.
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Legutko, Agnieszka Joanna. "Iceland's Financial Crisis in 2008. Political, Economic and Social Consequences." International Studies. Interdisciplinary Political and Cultural Journal 20, no. 1 (December 30, 2017): 113–30. http://dx.doi.org/10.1515/ipcj-2017-0020.
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The author analyzes the successful strategy of overcoming financial breakdown in the case study of Iceland. The aim of the article is to verify a hypothesis that the Icelandic model could become a panacea for future crises? A document analysis method is applied to present essential indicators such as GDP and trade balance. With the use of a source analysis method, the collapse of the financial sector is determined as the main cause of the slump. The systematization of crisis events is introduced and deepened by the social and political situation. Changes in the state’s condition after the crash are provided and future forecasts about economic development are discussed. As a summing up, the author disapproves of the hypothesis that the Icelandic model of overcoming the financial breakdown as a panacea for future crises, pointing out that it is only applicable for specific cases and cannot be seen as a magical remedy for every kind of crisis.
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Christensen, Leif, Pall Rikhardsson, Carsten Rohde, and Catherine Elisabet Batt. "Changes to administrative controls in banks after the financial crisis." Qualitative Research in Accounting & Management 15, no. 2 (June 18, 2018): 161–80. http://dx.doi.org/10.1108/qram-12-2016-0088.
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Purpose This paper aims to explore and explain how administrative controls have been changed as a response to a significant crisis, using the transition of the three largest Icelandic banks from bankrupt to operational entities after the 2008 financial crisis. The Icelandic banks are compared with three Danish banks to separate crisis-driven responses from simple market-driven reactions. Design/methodology/approach Empirical data were collected using semi-structured interviews. The participating Icelandic and Danish banks were considered as two units, which formed the basis for a comparative case study between the two countries. Findings Driven by an understanding of what is expected by the market rather than the need to inform and guide the employees the Icelandic banks implemented a number of revolutionary and formally documented changes. These changes included significant bigger risk management functions and policies and procedures documenting “everything”. However, in both countries, it seems that new values supported by the “tone at the top”, areas with limited formal documentation, are the most important management tools. Research limitations/implications The study relies on interviews with employees, and the actual changes of administrative controls have not been reviewed. The most important implication is that the situated logics in Iceland driven by external institutional pressure initiated a revolutionary implementation of values bypassing existing routines and formalised rules. Originality/value Although the use of management controls has been studied intensively, detailed studies of the banking sector have been lacking. Furthermore, there is limited knowledge of how administrative controls changed in response to the financial crisis.
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Jóhannsdóttir, Valgerður, and Jón Gunnar Ólafsson. "The Icelandic news media in times of crisis and change." Veftímaritið Stjórnmál og stjórnsýsla 14, no. 1 (May 31, 2018): 189–210. http://dx.doi.org/10.13177/irpa.a.2018.14.1.9.
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The news media around the world has experienced drastic changes in recent decades, and the Icelandic media is no exception. These changes originate in political, economic and not least technological developments. In this article we map key developments in the Icelandic media system and illustrate the changes it has undergone in the first decades of the 21st century. Journalism and media studies are under-researched fields of study in Iceland, and the country is usually absent from comparative work in these fields. Often it is simply grouped together with the other four Nordic countries. We argue that the Icelandic media system differs from those countries in several ways. Whilst it has moved towards the liberal model there are also indications of increased partisanship in the media in the last decade. The smallness of the media system has made it more vulnerable to the increasing competition and commercialisation in the digital era, and Iceland was particularly badly hit by the financial crisis in 2008. News media companies in Iceland are struggling financially, several media outlets have come and gone, mergers have been frequent and trust in the media is low. The view that some sort of public support is required to secure an independent media and high quality journalism is gaining ground in Iceland. This could lead to its media system becoming more similar to the democratic corporatist Nordic countries than is the case now.
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Gunnarsson, Eyvindur G. "The Icelandic Regulatory Responses to the Financial Crisis." European Business Organization Law Review 12, no. 1 (March 2011): 1–39. http://dx.doi.org/10.1017/s1566752911100014.
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Khalfan, Twahir, and Stefan Wendt. "The impact of financial and economic crisis on leverage: the case of Icelandic private firms." International Journal of Managerial Finance 16, no. 3 (November 29, 2019): 297–315. http://dx.doi.org/10.1108/ijmf-01-2019-0019.
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Purpose The purpose of this paper is to provide empirical insight into the impact of a financial crisis on capital structure of private firms. Specifically, the authors use the example of the systemic Icelandic financial crisis from 2008 to 2010 and analyze the influence of internally generated funds on leverage during the financial crisis compared to the non-crisis period. Design/methodology/approach The authors use a fixed-effects dynamic model to examine the impact of internally generated funds – measured as cash flow – with a data set that includes non-listed Icelandic firms. In addition, generalized method of moments is used to address potential endogeneity issues. Findings The authors find that internally generated funds have a different effect on capital structure during the financial crisis compared to the non-crisis period. While cash flow has an overall negative association with leverage, a positive relationship appears to exist during the crisis. However, when analyzing changes in cash flow from one year to the other, the sample firms appear to rely more on internally generated funds to adjust leverage during the financial crisis than in the non-crisis period. Originality/value Analyzing the extreme case of the Icelandic financial crisis allows us to shed light on capital structure effects in situations when both debt financing and internal financing opportunities are heavily curtailed.
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Edvardsson, Ingi Rúnar, and Unnur Dilja Teitsdóttir. "Outsourcing and financial crisis: evidence from Icelandic service SMEs." Employee Relations 37, no. 1 (January 5, 2015): 30–47. http://dx.doi.org/10.1108/er-11-2013-0168.
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Purpose – The purpose of this paper is to analyse the application of outsourcing within Icelandic service companies in the wake of the banking collapse. Design/methodology/approach – Findings are based on comparing surveys conducted in early 2009 (381 answers) and in the summer of 2013 (212 answers). Findings – In general outsourcing did not increase, but most SMEs had extended their outsourcing in almost every area of operation, such as human resource management (HRM), IT and peripheral tasks. Also, more SMEs gave cost-reduction as a reason for outsourcing in 2013, and more respondents in 2013 expressed a positive experience of outsourcing. It is uncommon for companies to outsource human resources or lay off staff. Instead, outsourcing mainly focuses on aspects of information technology as well as administrative and peripheral functions. Research limitations/implications – The research highlights service firms in one country by survey methods. Further research is needed in other sectors and countries, and more varied research methods are recommended. Originality/value – Research on outsourcing in SMEs in the wake of the financial crisis is rare, and very few studies have focused on the HRM implications of outsourcing in SMEs. This study can inform researchers and practitioners on critical aspects of outsourcing.
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Lenihan, Niall J. "How Has the EU Protected Depositors in the Financial Crisis?" Cambridge Yearbook of European Legal Studies 16 (2014): 289–312. http://dx.doi.org/10.1017/s1528887000002627.
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AbstractThis chapter addresses the question of how the EU has protected depositors in the financial crisis. The chapter will discuss (1) the impact in Europe of the US system for the protection of depositors, (2) the important changes made to the EU Deposit Guarantee Schemes Directive, first in 2009 in response to the 2007 deposit run on Northern Rock, and then again in 2014 in response to the financial crisis, (3) the decision of the EFTA Court regarding the scope of Iceland’s obligations under the EU Deposit Guarantee Schemes Directive, following the collapse of the Icelandic banking system in 2008, and (4) the introduction of a powerful depositor preference rule throughout the EU, in response to the resolution of the Cypriot banking system in 2013. This chapter argues that the EU has responded to the impact of the financial crisis on bank depositors by enhancing the legal protections available to depositors.
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Macheda, Francesco. "The role of pension funds in the financialisation of the Icelandic economy." Capital & Class 36, no. 3 (October 2012): 433–73. http://dx.doi.org/10.1177/0309816812460753.
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This article explores the decisive role of pension funds in the neoliberal restructuring of the Icelandic economy, arguing that, through their involvement in the pension-fund industry, the labour unions contributed to laying the foundations for Iceland’s economic financialisation. The socioeconomic stability provided by the labour organisations was the crucial element upon which the new financial regime of accumulation relied, enhancing the national economic ‘credibility’ that helped the internal market to attract foreign speculators as well as gaining access to loans from international market. I begin by examining how the structural crisis of the Icelandic economy produced an explosion of inflation and industrial conflict in the late-1980s. I then retrace the way the implementation of a neo-corporatist pattern enabled lower inflation and stabilisation of the currency. Finally, I analyse the way in which the involvement of the Icelandic trade unions in the financial mechanisms through the pension industry generated a degree of identification with pro-market governmental policy on the part of union leaders, encouraging them to tailor their own strategies accordingly. My conclusion is that Icelandic unions’ consensus concerning the ‘stabilisation programme’ implemented by the neoliberal coalitions relies on their embeddedness into the financial structures of the national economy through occupational pension funds.
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Khalfan, Twahir, and Jón Þór Sturluson. "Corporate finance approaches of Icelandic private firms after the financial crisis." Managerial Finance 44, no. 11 (November 12, 2018): 1274–91. http://dx.doi.org/10.1108/mf-05-2017-0167.
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Purpose The purpose of this paper is to provide insights about corporate finance decision-making of Icelandic private firms that have experienced a dramatic financial crisis in 2008–2010. It observes the capital budgeting methods and cost of capital techniques for private firms after a systemic financial crisis. Moreover, the paper identifies the main determinants of capital structure and capita rationing during this period. Design/methodology/approach This paper surveys corporate finance practices of 80 out of the 250 largest bank-centred private firms after the financial crisis. Findings Highly leveraged private firms that have experienced a dramatic financial crisis in 2008–2010 use payback and net present value techniques almost at a similar rate when assessing new investments. The sample firms largely rely on the cost of debt to determine the cost of invested capital. However, capital asset pricing model is the most popular method among the few sample firms that estimate the cost of equity. The need to maintain financial flexibility and cost associated with financial distress are the most influential factors regarding capital structures, whereas investment practices avoid capital rationing associated with the financial crisis. Research limitations/implications The limitations of the study are that it is country specific and absence of data over the period before the financial crisis that may have been applied to present more insight into this topic. Practical implications Sample firms fail to incorporate appropriate cost of capital methods and as the result they are likely to apply incorrect “hurdle rate” which could undervalue or overvalue new investments. This paper indicates that capital budgeting decisions by managers of the bank-centred Icelandic private firms who tend to be major shareholders do not reflect the tendency to expropriate outside and minority investors. Private firms that have emerged from the meltdown of the financial system highlighting the importance of “special” lending relationship in assisting bank-centred firms to avoid the severity of financial constraints. Originality/value This study employs a failure of the banking system to provide new knowledge about corporate finance practices of private firms after the financial crisis that have curtailed the access to both internal and external sources of capital.
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Hawkins, Mary, and Helena Onnudottir. "Land, Nation and Tourist." Anthropological Journal of European Cultures 26, no. 2 (September 1, 2017): 110–26. http://dx.doi.org/10.3167/ajec.2017.260208.
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Land is central to Icelandic identity. It is birthright, heritage, a site of memory and belonging; mountains and fjords are the stuff on which Icelandic dreams are made. Land is made culture through story and song, told at family gatherings, and sung at schools and on hiking trips. Icelandic identity was built on this imagining, coupled to a vision of Icelanders as an exceptional people, a Viking race. The events of the Global Financial Crisis (GFC), which exposed institutional corruption, caused many Icelanders to doubt the Viking image. At the same time, Iceland has been invaded by tourists. This article, based on participant observation, a survey and interviews, argues that one significant effect of the post-GFC foreign invasion has been a transformation of the cultural and moral order in Iceland, away from the boasting Viking and towards a new set of values within which land and nature occupy an even more central place.
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Mixa, Már Wolfgang, and Vlad Vaiman. "Individualistic Vikings: Culture, Economics and Iceland." Veftímaritið Stjórnmál og stjórnsýsla 11, no. 2 (December 15, 2015): 355. http://dx.doi.org/10.13177/irpa.a.2015.11.2.12.
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Icelandic culture has generally been considered to share many similarities to the Nordic cultures. However, the financial crisis in 2008 painted a completely different picture, with the Nordic nations faring much less worse than Iceland, which saw its banking system becoming almost entirely worthless. Looking at traditional cultural yardsticks in the vein of the most commonly used research in the field of business and organizational management, generally linked to Hofstede´s dimensional studies, one would at first glance conclude that Icelanders would have behaved in a similar manner as people in the Nordic nations. By focusing on savings ratio, it is shown that Icelanders were much more risk-seeking during the prelude of the crisis. Many nations badly hit during the 2008 financial crisis have a high level of individualism inherent in their culture. Iceland fits this scenario. Thus while general cultural characteristics may lack explanatory power regarding economic behavior of people between cultures, the individual/collective cultural dimension may provide clues of what dangers (and possible strengths) lurk within societies from a financial point of view. Such developments may affect the financial stability of nations, especially those with a high level of individualism where financial liberalization with possible abuses is occurring.
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Helgason, Ólafur Sindri, and Fredrik Kopsch. "Rental legislation and the changing Icelandic rental market." Nordic Journal of Surveying and Real Estate Research 5 (November 17, 2020): 7–28. http://dx.doi.org/10.30672/njsr.95233.
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Rental markets hold an important role for a functioning housing market as a whole. Households with shorter time horizons, as well as households with little private equity and difficulties acquiring capital can see their housing needs met on the rental market. A functioning rental market does however require some sort of legislation. In this paper we argue that legislation must adapt to changing rental markets. We do so from the specific case of Iceland. The Icelandic rental market has, since the financial crisis, undergone noticeable structural change, evident from a number of perspectives. By applying a framework based in the role of rental market legislation, we provide a comparison between legislation in the Nordic countries. We conclude, based both in the presented structural change of the Icelandic rental market, and in aspects of Nordic rent legislation, that there is a case to be made for changes to the Icelandic legislation.
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Árnason, Vilhjálmur, and Salvör Nordal. "Moral Culture and the Financial Crisis in Light of the Icelandic Experience." Midwest Studies In Philosophy 42, no. 1 (August 6, 2018): 117–32. http://dx.doi.org/10.1111/misp.12086.
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Ólafsson, Stefán. "Hrunið skýrt: Sjónarhorn klassískra kenninga um fjármálakreppur." Veftímaritið Stjórnmál og stjórnsýsla 12, no. 1 (June 15, 2016): 101. http://dx.doi.org/10.13177/irpa.a.2016.12.1.6.
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We explain the Icelandic bubble economy and the financial crisis of 2008 with lessons from classical political economy theories (Keynes, Minsky, Kindleberger, Reinhart and Rogoff). We ask why and how the Icelandic bubble came about? Why it went so far off track? Who were the main actors? And why they did it? At the base of these developments were changes in the policy environment and institutional changes in finance and economy, which produced both new opportunities and new risks, as well as paving the way for new powers to rise in the society, not least with the full privatization of the state banks in 2003. An overextended belief in the virtues of the free market of the private sector led to a laissez-faire attitude towards the new risks, while the new opportunities were pursued with great efforts. This produced a classical but unusually large financial bubble, culminating in 2003-2008, with massive and risky growth of banks. The main characteristic of the Icelandic bubble was extensive business speculation with borrowed money. The consequence was excessive accumulation of foreign debt, which tends to be the ultimate cause of financial crises. The main actors were the top ten percent of income earners, who gained tremendously during the decade leading up to the collapse. Their incomes grew way beyond all others, not least their financial earnings, which sprang mainly from the activities of the unsustainable bubble economy.
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Cullen, Jay, and Guðrún Johnsen. "Promoting Bank Stability through Compensation Reform: Lessons from Iceland." Veftímaritið Stjórnmál og stjórnsýsla 11, no. 2 (December 15, 2015): 333. http://dx.doi.org/10.13177/irpa.a.2015.11.2.11.
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This article argues that the program of compensation reform at financial institutions – despite recent wide-ranging changes – remains incomplete. A considerable body of theoretical and empirical research has been developed which, for the most part, suggests that compensation incentives embedded in compensation contracts at banks encouraged risk-taking behaviour which contributed to the Global Financial Crisis. Extensive reforms to compensation rules at financial institutions have been implemented across the globe, including increased use of deferral, mandatory capping of bonuses and the introduction of claw-back powers. Relying on observations on the failures of Icelandic and UK banks, and legal and economic analyses of compensation reforms in each jurisdiction, this paper argues that some elements of the Icelandic and UK reform programs ought to be transposed to the EU level. Arguably, these recommendations will help improve the resilience of the European banking system and contribute to greater financial stability.
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Szunke, Aleksandra. "Changes in monetary policy after the crisis - towards preventing banking sector instability." Corporate Ownership and Control 11, no. 3 (2014): 470–76. http://dx.doi.org/10.22495/cocv11i3conf2p8.
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The instability of the banking sector has become the subject of wider scientific research during the global financial crisis. The financial crisis of the first decade of the twenty-first century began in the U.S. subprime mortgage market and quickly spread to the whole banking sector in the United States as well as in many countries of the global economy. Among five major American investment banks - Lehman Brothers went bankrupt, Bear Stearns and Merrill Lynch were taken over by other banks, and Goldman Sachs and Morgan Stanley were transformed into commercial banks, which were covered by the supervision and regulations of the central bank - the Federal Reserve System. The consequences of the global financial crisis also affected British banks, including The Royal Bank of Scotland, Lloyds Bank, Halifax, Abbey Bank, Barclays Bank and NBC Bank. In Iceland, during the global financial crisis which affected the Icelandic banking sector, three largest banks: Glitnir Bank, Landsbanki and Kauphting were nationalized, which means that the control was taken over by their government. It has caused, that reflections and scientific research on financial stability were replaced by the study of instability in particular in relation to the banking sector. The main aim of the study is to identify the general framework of the response system of central banks on the phenomenon of banking sector instability, in the context of preventing it in a long term. Current - the traditional system proved to be ineffective, because it did not prevent the spread of the factors that led to the destabilization of the banking market
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Jóhannsdóttir, Valgerður. "Markaðsvæðing frétta: Greining á innihaldi frétta í tveimur dagblöðum og tveimur vefmiðlum fyrir og eftir hrun." Veftímaritið Stjórnmál og stjórnsýsla 12, no. 2 (December 19, 2016): 303. http://dx.doi.org/10.13177/irpa.a.2016.12.2.6.
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The media around the world are presently undergoing dramatic changes. They have their roots in political, economic and not least technolgical changes and have lead to ownership concentration, commercialisation and increased competition. Research indicates that this development has greatly affected professional journalism and led to an increasing emphasis on stories about crime, sport and entertainment and less news about politics, international, social and economic affairs. Some researchers posit that this applies particulary to online news. These changes have certainly had their impact in Iceland like other western countries, but little is known about its effect on news content. This study compares the content of the main off and online newspapers in Iceland, in the year 2005 and 2013, or before and after the financial crisis in 2008. The findings indicate that the Icelandic national daily press publishes less political and economic news now than before the the crisis in 2008, and more of so called soft news. This holds particularily true for the online news.
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Baicu, Claudia Gabriela, and Mar Wolfgang Mixa. "BANKING SYSTEMS IN ROMANIA AND ICELAND: TWO DIFFERENT WORLDS BUT SIMILAR DEVELOPMENT." Journal of Economic Development, Environment and People 6, no. 2 (June 30, 2017): 24. http://dx.doi.org/10.26458/jedep.v6i2.534.
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The novelty of this paper is the comparative analysis of the Romanian and Icelandic banking systems. The study results reveal that despite the fact that Romania and Iceland are two different worlds, there are several similarities between the banking systems of these countries. They include a late development of banking systems, foreigners contributing a great deal to the development of the banking systems in the early stage of evolution. After the Second World War until the 1990s specialized banks operated in both countries. The banking systems of both countries prior to the 1990s were dominated by politics. Liberalization of banking and capital occurred both in Romania and Iceland after 1990; the bank privatization process took place during a similar period (1999-2006, Romania; 1998-2002, Iceland). Before privatization, banks in both countries lacked experience in a new banking “arena”. The global financial crisis greatly affected the two banking systems. Despite similarities, the evolution of the two banking systems was also marked by differences, notably the ownership origin of banks after privatization (foreign dominance in Romania; domestic owners in Iceland) and different business models developed by banks in the pre-crisis period.
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Kristinsson, Davíð G. "Fræðamörk: Um markalínur milli heimspeki og grannvísinda hennar í rannsóknum á hruninu." Íslenskar kvikmyndir 19, no. 2 (October 24, 2019): 275–327. http://dx.doi.org/10.33112/ritid.19.2.11.
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The astonishing range of writings about the social causes and consequences of the Icelandic 2008 financial crisis proffers a unique opportunity to analyse comparative-ly how scholars from different disciplines in the humanities and social sciences deal with one and the same subject. How does the scholarly approach differ regarding the employment of theories, hypotheses, empirical data and concepts? Is the methodology of the humanities noticeably different from that of the social sciences? Did the boundaries of philosophy and related sciences change in times of crisis, momentarily or permanently?
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Karlsson, Johannes, and Thorolfur Matthiasson. "Basic Income—an early Icelandic experiment**." Nordic Tax Journal 2019, no. 1 (August 7, 2019): 56–62. http://dx.doi.org/10.1515/ntaxj-2019-0004.
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Abstract Old age, illness, and/or physical and/or mental disabilities may limit the ability of an individual to generate enough income to cover basic costs of living. Most developed nations provide financial assistance to persons with limited abilities. In 1974, an Icelandic government passed an act of law providing a tax credit, payable to taxpayers under certain conditions. The tax allowance was applied first to settle the taxes and public levies owed by the taxpayer, with any amount remaining paid out to the individual. This system can be seen as a first, limited attempt at establishing a partial universal basic income of sorts. This social interaction between stakeholders on how to share the tax revenue between the taxpayers led to a government crisis. The shareholders in this partial universal basic income system, the state and municipalities, the old age community, the trade unions, and the employers all have different financial and political interests and were affected by this reform. The lesson is that a basic income would need strong supporters if implemented, where the role of the government and/or the parliament would be mapped. Its supporters must be able to withstand the pressure from the social partners in the labor market because of the interactivity of the social security system and the pension fund system, which is not a part of the fiscal system in Iceland. The conflict of interests becomes apparent.
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Bier, Jess. "It’s a small, small, small world: The Icesave dispute and global orders of difference." Environment and Planning C: Politics and Space 38, no. 7-8 (April 20, 2020): 1291–307. http://dx.doi.org/10.1177/2399654420917410.
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Drawing on Roy and Ong’s work on worlding, this article introduces the concept of orders of difference to analyze the selective incorporation of the nation-state into supranational political and economic systems. I argue that attending to orders of difference is necessary to better understand the ways that imagined equality is mobilized to reproduce global injustice. I do so through a combined examination of the liberal globalism of the iconic “It’s a Small World” ride at Disney theme parks and Iceland's role in the Icesave dispute—a key struggle of the 2007–8 financial crisis. The design of the Small World 1 ride effects a form of worlding by ordering differences into those that are similar enough to be permitted and those that are too different to be incorporated. In the process, the ride invokes a small world 2 that precisely encapsulates the more complex globalisms that inform the organizational structure of supranational bodies like the European Union and European Economic Area. Global finance is said to be one of the world’s most seamless supranational systems, but one of its many seams was made visible during the Icesave dispute as two orders of difference came into conflict: European Economic Area membership and Icelandic politics. Representatives of the Netherlands and the UK argued that Iceland’s membership in the European Economic Area meant that Iceland was fully the same as other member nations, while those from Iceland successfully argued that its domestic and international economies were irreducibly different. The dispute thus hinged upon a debate over how differences are ordered within and between nations, including the number of permissible orders and the precise extent to which member nations are or should be made commensurable through supranational geopolitics.
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Raza, Hamid, Bjorn Runar Gudmundsson, Gylfi Zoega, and Mikael Randrup Byrialsen. "Crises and capital controls in small open economies: a stock–flow consistent approach." European Journal of Economics and Economic Policies: Intervention 16, no. 1 (February 2019): 94–133. http://dx.doi.org/10.4337/ejeep.2019.00042.
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This paper attempts to explain the role of capital inflows in creating economic booms and busts in a small open economy with sovereign currency. We develop a stock–flow consistent (SFC) model for a small open economy while relying on the experience of the Icelandic crisis. We demonstrate the destabilising effects of capital inflows on the economy by allowing for a sudden stop, and also discuss the role of capital controls as a policy response in the event of a crisis due to sudden stops. Finally, we discuss the policy implications of our results in order to tackle the destabilising effects associated with financial flows in a small economy.
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Raza, Hamid, Bjorn Runar Gudmundsson, Gylfi Zoega, and Mikael Randrup Byrialsen. "Crises and capital controls in small open economies: a stock–flow consistent approach." European Journal of Economics and Economic Policies: Intervention 16, no. 1 (February 2019): 94–133. http://dx.doi.org/10.4337/ejeep.2019.0042.
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This paper attempts to explain the role of capital inflows in creating economic booms and busts in a small open economy with sovereign currency. We develop a stock–flow consistent (SFC) model for a small open economy while relying on the experience of the Icelandic crisis. We demonstrate the destabilising effects of capital inflows on the economy by allowing for a sudden stop, and also discuss the role of capital controls as a policy response in the event of a crisis due to sudden stops. Finally, we discuss the policy implications of our results in order to tackle the destabilising effects associated with financial flows in a small economy.
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Méndez-Pinedo, Maria Elvira. "The Icesave Dispute in the Aftermath of the Icelandic Financial Crisis: Revisiting the Principles of State Liability, Prohibition of State Aid and Non-discrimination in European Law." European Journal of Risk Regulation 2, no. 3 (September 2011): 356–72. http://dx.doi.org/10.1017/s1867299x00001379.
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This study focuses on the Icesave dispute and Icesave agreements between Iceland, the UK and The Netherlands in the light of European law (EU and EEA law) and explores two main issues: 1) the State liability for breaches of EU/EEA law on the basis of Directive 94/19/EC following a systemic bank collapse in Iceland; and 2) the principle of non-discriminatory interplay between the nationalisation of Icelandic banks (State aid) and the payment of the minimum guarantee of €20.887 to depositors of Icesave accounts in the branches of Landsbanki in the UK and The Netherlands. This dispute was handled through diplomatic negotiations. The author is highly critical of the methodology followed. This cross-border dispute brought to light new complex problems in a grey area of European law which should have been brought before the highest European courts. Icesave also seems to have turned Icelanders against the process of European integration and the EU.
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Pinedo, Maria Elvira Mendez. "Indexation Of Consumer And Mortgage Credit In Iceland In 2014." International Journal of Finance & Banking Studies (2147-4486) 3, no. 4 (July 21, 2014): 41–67. http://dx.doi.org/10.20525/ijfbs.v3i4.191.
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Six years after the financial crisis that led to the collapse of the banking system in 2008, the over-indebtedness of households is one of the most important problems in Iceland. This study aims to cast light on a specific feature of the Icelandic credit system in connection with the problem of over-indebtedness. The main research question is whether the end of indexation of credit is close or not. The author argues, in the first place, that indexation of credit ex-post to the consumer price index (CPI) in negative amortization schemes is responsible for over-indebtedness. In the second place, the author describes the challenges ahead in the field of consumer and mortgage credit in Iceland in the light of European law (European Union EU and European Economic Area EEA). The incorporation of Directive 2008/48 on credit agreement for consumers to the Icelandic domestic order through the EEA Agreement allowed a preliminary legal review of the practice in light of EU/EEA consumer credit law, both at national and European level without a final conclusion. It has nevertheless led to the judicial review on the legality of some indexation alleged malpractices before national courts and to the EFTA Court for interpretation (mostly on Directives 93/13/EEC on unfair terms 87/102/EEC on consumer credit). A ruling from the Supreme Court is expected on several cases. A critical battle between the legality, the fairness and the legitimacy of indexation of credit is taking place in Iceland under the influence of European law.
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Ragnarsdóttir, Berglind Hólm, Jón Gunnar Bernburg, and Sigrún Ólafsdóttir. "The Global Financial Crisis and Individual Distress: The Role of Subjective Comparisons after the Collapse of the Icelandic Economy." Sociology 47, no. 4 (November 9, 2012): 755–75. http://dx.doi.org/10.1177/0038038512453790.
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Osiński, Joachim. "Przemiany polityczne na Islandii w warunkach kryzysu bankowego i gospodarczego." Kwartalnik Kolegium Ekonomiczno-Społecznego. Studia i Prace, no. 1 (November 29, 2011): 14–45. http://dx.doi.org/10.33119/kkessip.2011.1.1.
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The author begins with a brief description of the essential political institutions of Iceland, as a republic with a parliamentary cabinet form of government and the special role of the president, arguing with the point of views that Iceland should be seen as a state with a semi-presidential form of government. Describing the political situation before the banking crisis, the author underlines the strong position of the Independence Party, which according to the results of the parliamentary elections (elections in 2007), plays a leading role in the "political life" of the state. The author pays attention to the process of oligarchisation in that party and the informal systems of social-network-based links and pathological links between the worlds of politics and business. Growing since the 90s, the dominance of a few family clans, together with the deregulation and privatization of the economy, led to nepotism and lack of accountability on the part of politicians and business representatives. An expansion of the three largest Icelandic banks Landsbanki, Kaupthing and Glitnir, without any significant criticism and state control, has led to a situation where at the end of 2008 their assets were 10-fold greater than the GDP of Iceland. Loss of confidence in the interbank markets after the collapse of Lehman Brothers in the U.S., caused inhibition of liquidity and consequently the collapse of these banks, eventually acquired by the state. The most spectacular was the collapse of Icesave - the Internet branch of Landsbanki operating in the UK and the Netherlands. The disintegration of the banking system led to a disintegration of the coalition government. Early elections in April 2009, won by the Social Democratic Alliance and the Left-Green Movement, led to the formation of a center-left government of Prime Minister, Ms J. Sigur?ardóttir. The first major action was the government's reorientation of foreign policy and submitting an application for EU membership, and the subsequent arrangement of the debts after the collapse of these banks, reform of the central bank and banking supervisors, the establishment of a parliamentary committee to investigate the banking crisis and identify those responsible, the appointment of a special Prosecutor investigating violations of law during privatization of the banking sector and the actions taken on the eve of the crisis. The article contains the constitutional and legal analysis of the first and second so-called referendum. on Icesave, conducted after the President vetoed a further act concerning Iceland's agreements with its creditors - the United Kingdom and the Netherlands. As a result, residents of Iceland have not agreed to repay debts incurred without any fault on their part and through arrogance, incompetence and greed of the financial elite and the political managers controlling the banking system. This puts into question the country's future membership in the EU. The government, despite the opposition to the proposal made by a vote of no confidence, which fell, still take the difficult decisions associated with the revitalization of the banking system and economy of Iceland and improve its international image.
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Belfrage, Claes, and Felix Hauf. "The Gentle Art of Retroduction: Critical Realism, Cultural Political Economy and Critical Grounded Theory." Organization Studies 38, no. 2 (September 25, 2016): 251–71. http://dx.doi.org/10.1177/0170840616663239.
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This article, first, proposes critical grounded theory (CGT) as a way to develop systematically an array of methods and theoretical propositions into a coherent critical methodology for organization studies (and beyond). Second, it demonstrates CGT’s usefulness through a case study of competing recovery projects from the Icelandic financial crisis. CGT is developed in engagement with the emerging paradigm of cultural political economy (CPE) and its preferred method of critical discourse analysis (CDA). CPE analyses the evolution of ‘economic imaginaries’ in both their structural/material and semiotic/discursive dimensions. This requires a critical realist, multi-dimensional research strategy which emphasizes ethnographic methods and substantial theoretical and historical work. The proposed methodology of CGT enables a retroductive research process that combines deductive theoretical deskwork with inductive fieldwork enabled by grounded theory tools to analyse organizational process, stability and change.
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Zhang, Xinyu. "Þannig er saga okkar“: Um sagnritunarsjálfsögur og skáldsöguna Hundadaga eftir Einar Má Guðmundsson." Íslenskar kvikmyndir 19, no. 2 (October 24, 2019): 249–73. http://dx.doi.org/10.33112/ritid.19.2.10.
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The ambiguity between reality and fiction haunts Einar Már Guðmundsson’s novel Hundadagar (Dog Days, 2015), as it is a fictional narrative about factual, historical figures and events, such as Jörgen Jörgensen, Rev. Jón Steingrímsson, Finnur Magnússon and Guðrún Johnsen, while the same can be said about many other novels labeled as postmodernism. Canadian literary scholar Linda Hutcheon coined the concept of historiographic metafiction to describe fictions as such, which are “intensely self-reflexive”, while “paradoxically lay claim to historical events and personages”. Hutcheon suggests that historiographic metafictions fully illuminate the very way in which postmodernism entangles itself with both the epistemological and ontological status of history. This paper begins with an introduction to Hutcheon’s theoretical contributions on postmodernism, postmodern literature and the relationship between history and fiction, followed by a reading of Hundadagar as a historiographic metafiction. The narrator’s strategies—such as parataxis, metanarrative comments, we-narrative discourse and documentary intertext—largely indicate an imitation, a revelation, or say, a parody of the process of historian’s writings. The paper further suggests that it is the Icelandic financial crisis in 2008 that prompts the narrator to revisit the 18. and 19. century, since the financial crisis takes the role of a rupture of the Enlightenment ideals, leading to disorder and chaos. Moreover, the narrator finds an uncanny similarity between the past and the present, as if the history has been repeating itself. The spectre of history keeps (re)appearing in a deferred temporality. While revisiting the past, the narrator also (re)visits the present in an allegorical way. In a word, as a historiographic metafiction, Einar Már Guðmundsson’s Hundadagar is “fundamentally contradictory, resolutely historical, and inescapably political”, just as Hutcheon’s perception of postmodernism.
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Nyblom, Åsa, Karolina Isaksson, Mark Sanctuary, Aurore Fransolet, and Peter Stigson. "Governance and Degrowth. Lessons from the 2008 Financial Crisis in Latvia and Iceland." Sustainability 11, no. 6 (March 22, 2019): 1734. http://dx.doi.org/10.3390/su11061734.
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This paper investigates the role of governance dimensions in socio-economic transitions in line with degrowth, i.e., an equitable downscaling of the economy. Our focus is on experiences from the 2008 economic crisis in Latvia and Iceland. Although these cases are not in themselves examples of degrowth, we see them as important sources of empirical learning from major socio-economical transitions; furthermore, we see crises as possible starting points for future degrowth transitions. This paper applies a governance framework to explore the vast differences in management strategies and crisis outcomes in Latvia and Iceland. In Iceland, public resistance led to a shift in policy measures such that economic inequality and the negative social consequences of the crisis decreased. In Latvia, public resistance existed but had no strong influence. The outcome in Latvia included none of the elements of equitable downscaling found in the case of Iceland. These two cases show how differences in formal institutional arrangements, political culture and societal trust affect different governance dimensions during a time of crisis. The analysis illustrates the importance of institutional and governance dimensions in major socio-economical transitions, and demonstrates how they influence the kind of transition that can be realized.
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Arnbjörnsson, Gylfi, and Halldór Grönvold. "The financial crisis in Iceland." Transfer: European Review of Labour and Research 15, no. 1 (January 1, 2009): 153–58. http://dx.doi.org/10.1177/102425890901500113.
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Guðmundsson, Björn Rúnar. "Financialisation and financial crisis in Iceland." European Journal of Economics and Economic Policies: Intervention 13, no. 3 (December 2016): 292–322. http://dx.doi.org/10.4337/ejeep.2016.03.05.
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Kristjánsdóttir, Helga, and Stefanía Óskarsdóttir. "European FDI in Ireland and Iceland: Before and after the Financial Crisis." Journal of Risk and Financial Management 14, no. 1 (January 6, 2021): 23. http://dx.doi.org/10.3390/jrfm14010023.
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This paper analyses Foreign Direct Investment (FDI) investment in Ireland and Iceland from other European countries during two periods, i.e., the pre-financial crisis period of 2000–2007 and the financial crisis period of 2008–2010. The aim of this research is to determine what made the countries interesting to foreign investors in both good and bad times; and, secondly, to examine whether European Union membership (and the Euro) made a difference in this respect. The results were obtained by using data from the OECD, the World bank, and other sources. The model constructed for the study applies the inverse hyperbolic sine transformation of the gravity model, which is a novel approach. The results demonstrate that before the financial crisis of 2008, European Union (EU) membership did not help Ireland attract more FDI from other EU countries. However, once it had been hit by the crisis, Ireland attracted more FDI from other EU countries. Iceland, on the other hand, which is not an EU country, attracted FDI from non-EU countries rather than from EU countries before the financial crisis. After the crisis, however, the origin within Europe, of FDI in Iceland had no significant effect on the flow of FDI into the country.
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Osiński, Joachim. "Próby modernizacji pozycji i funkcjonowania parlamentów w warunkach kryzysowych." Kwartalnik Kolegium Ekonomiczno-Społecznego. Studia i Prace, no. 1 (December 3, 2012): 43–72. http://dx.doi.org/10.33119/kkessip.2012.1.2.
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The 2007+ financial crisis, which also had an impact on real economy, paradoxically resulted in an increase of states’ activity in economy and in the growth of expectations of citizens towards states. The crisis makes them see the state as the only institution able to guarantee financial and social safety as well as orderly development of global economy in future. The article tries to answer the following question: is the state able to secure that feeling of safety and society’s ability to develop, and will the incoming crises influence the modification of horizontal and vertical extent of functions of the modern state? The question whether modern states modernize or not, disregarding economic, social, cultural and military crises, is also a subject of preliminary analysis. The 2007+ economic crisis caused an increase in state activities in fields both related to economic problems and providing social and financial safety for citizens. The modernization of state institutions (the state considered as ontological being, i.e. is not identified with any present day state) is not related to crises. The internal institutions of state, as parliaments and executive are also modernized to a certain extent. The analyses of Scandinavian, US and Canadian parliaments included in the article prove that the parliaments use the legislative possibilities and increase the scope of control activities performed during crisis. Occasionally this leads to constitution infringement (US Congress). On other occasions special parliamentary commissions and direct democracy institutions are used (Iceland). During a crisis a phenomenon of „financial world imperialism” emerges. It is something more than financialization of real economy (industrial, services and agriculture). It is a trend leading to the subordination of all the other spheres of activity of states and societies, including politics, law and culture. It is observed in contemporary highly developed societies as well as in some countries of „peripheral capitalism”. This trend is visible when democracy is used, including parliamentary procedures and decision-making processes in executive, to advance special interests of the financial world, its continuity and its profits.
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Johnstone, Rachael Lorna, and Aðalheiður Ámundadóttir. "Defending Economic, Social and Cultural Rights in Iceland’s Financial Crisis." Yearbook of Polar Law Online 3, no. 1 (2011): 455–77. http://dx.doi.org/10.1163/22116427-91000067.
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Gunnlaugsson, Geir. "Financial crises and child health: reflections from Iceland." BMJ Paediatrics Open 1, no. 1 (August 2017): e000168. http://dx.doi.org/10.1136/bmjpo-2017-000168.
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Kristjánsdóttir, Helga, and Stefanía Óskarsdóttir. "EU-COUNTRY AND NON-EU-COUNTRY AT THE TIME OF CRISIS: FOREIGN DIRECT INVESTMENT." Baltic Journal of Economic Studies 6, no. 3 (2020): 19–23. http://dx.doi.org/10.30525/2256-0742/2020-6-3-19-23.
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The global financial crisis affected the flows of foreign direct investment (FDI). This study focuses on two countries in the midst of the financial crisis: Iceland with IMF backup, and Ireland with ECB backup. The research focus is on the situation from the broad perspective of international economics and political atmosphere, combining government decisions with economic consequences. We analyze inward foreign direct investment, incorporating factors like economic size and stock market firms, receiving portfolio investment, rather than FDI. Our findings indicate that before the crisis the economic wealth in the domestic market to have positive effects on FDI, and firms receiving portfolio investment on the stock market are competing with FDI. This is the case for both Ireland and Iceland. However, after the crisis, these factors have insignificant impact on FDI.
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Kuz'min, D. "Risk Factors in Equilibrium Models of Open Economies." World Economy and International Relations, no. 9 (2010): 23–28. http://dx.doi.org/10.20542/0131-2227-2010-9-23-28.
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World liquidity crisis, which started in the USA in 2007, is reputed to be the first full-fledged global financial crisis. The liquidity crisis became global exactly due to the influence of large economies' national financial markets on many small ones. The analysis of the crisis expansion and development in these states (the USA, China, Iceland, Mexico, CEE countries) demonstrated that not only working accounts and reserves, but also foreign and internal borrowings, and therefore, household consumption, investments and government consumption proved to be affected by cyclic processes.
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GUDMUNDSSON, MÁR. "GLOBAL FINANCIAL INTEGRATION AND CENTRAL BANK POLICIES IN SMALL, OPEN ECONOMIES." Singapore Economic Review 62, no. 01 (March 2017): 135–46. http://dx.doi.org/10.1142/s0217590817400069.
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Global financial integration intensified in the period leading up to the Great Financial Crisis, as was witnessed by the growth of cross-border banking, capital flows, and gross external capital positions. For small, open economies (SOEs) that have lifted restrictions on capital movements, global financial integration seems to have undermined the scope for independent monetary policy, even if these countries had adopted a flexible exchange rate regime. Monetary policy transmission was weakened through the interest rate channel, as long-term rates in SOEs became increasingly correlated with long rates in large, advanced countries. The exchange rate channel was unstable, however, with exchange rates diverging from fundamentals as uncovered interest rate parity failed to hold over relevant periods and capital flows were volatile. These tendencies can contribute to monetary and financial instability when they interact badly with other economic and financial risks that can face small, open, and financially integrated economies. This was the case in Iceland. A fundamental rethinking of policy frameworks and tools has been underway in SOEs in the wake of the crisis. Potential policy instruments include foreign exchange intervention, enhanced prudential rules on foreign exchange risks, macroprudential tools, better alignment of fiscal and monetary policy, and even selective capital flow management tools.
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Sigurjonsson, Throstur Olaf, and Mar Wolfgang Mixa. "Learning from the “worst behaved”: Iceland's financial crisis and the Nordic comparison." Thunderbird International Business Review 53, no. 2 (February 17, 2011): 209–23. http://dx.doi.org/10.1002/tie.20402.
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Bernburg, Jón Gunnar. "The cascading crisis and the changing base of popular protest: The case of Iceland." Current Sociology 67, no. 7 (March 21, 2019): 1018–38. http://dx.doi.org/10.1177/0011392119833104.
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The rise of economic injustice protests during the Great Recession era – i.e. against economic inequality, flawed democracy, and austerity – begs the question whether the social and political divisions underlying protest behavior have changed. Iceland offers a microcosm for studying such changes. Since the crisis struck, huge protests against economic injustice have emerged repeatedly, providing an opportunity to study how protest behavior has changed during the cascading crisis, that is, a crisis that started in finance but then led to recession, austerity, and political crisis. This article uses survey data obtained in Iceland before the crisis, and during two protest waves emerging at different stages of the crisis, that is, during the 2008–2009 financial crisis, and during the 2016 ‘Panama Papers leak’. The author finds that economic vulnerability, perceptions of flawed democracy, and political centrism emerged as predictors of protest behavior during the crisis. But the role of ‘new social movements’ allegiance seems to diminish in the later stage of the crisis. The study supports broad theses about changes in popular protest, yet it illustrates the need to embed the work in a given (evolving) social context.
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Bergmann, Eiríkur. "Populism in Iceland: Has the Progressive Party turned populist?" Veftímaritið Stjórnmál og stjórnsýsla 11, no. 1 (June 15, 2015): 33. http://dx.doi.org/10.13177/irpa.a.2015.11.1.3.
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Though nationalism has always been strong in Iceland, populist political parties did not emerge as a viable force until after the financial crisis of 2008. On wave of the crisis a completely renewed leadership took over the country’s old agrarian party, the Progressive Party (PP), which was rapidly transformed in a more populist direction. Still the PP is perhaps more firmly nationalist than populist. However, when analyzing communicational changes of the new postcrisis leadership it is unavoidable to categorize the party amongst at least the softer version of European populist parties, perhaps closest to the Norwegian Progress Party.
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Prasch, Robert E. "Meltdown Iceland: Lessons on the World Financial Crisis from a Small Bankrupt Island." Review of Political Economy 23, no. 2 (April 1, 2011): 327–30. http://dx.doi.org/10.1080/09538259.2011.561570.
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Kvalnes, Øyvind, and Salvör Nordal. "Normalization of Questionable Behavior: An Ethical Root of the Financial Crisis in Iceland." Journal of Business Ethics 159, no. 3 (February 14, 2018): 761–75. http://dx.doi.org/10.1007/s10551-018-3803-8.
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Khenkin, S. "Spain in Zone of Turbulence." World Economy and International Relations, no. 4 (2012): 71–81. http://dx.doi.org/10.20542/0131-2227-2012-4-71-81.
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The global financial and economic crisis abruptly changed the socio-economic and political situation in Spain. While having successfully developed in the decade before the crisis, the country became one of the most unfortunate countries in the EU (the so-called PIIGS group, which also includes Greece, Italy, Portugal and Iceland). After centuries of isolation of Spain integrated into European institutions and started to play a prominent role at the international arena. In the proposed article, the author explores the problems of internal and foreign policy, facing the modern Spain.
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Bernburg, Jón Gunnar. "Economic Crisis and Popular Protest in Iceland, January 2009: The Role of Perceived Economic Loss and Political Attitudes in Protest Participation and Support*." Mobilization: An International Quarterly 20, no. 2 (June 1, 2015): 231–52. http://dx.doi.org/10.17813/1086-671x-20-2-231.
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The recent wave of protest associated with the global financial crisis provides opportunity to examine the link between economic crisis and collective action in the context of affluent democratic society. I study the mobilization of individual citizens in one of the first of these protests occurring in Iceland in January 2009. Using a survey representing the adult population of the Reykjavík area (N = 610), I examine the role of perceived economic loss and political attitudes in protest behavior (controlling for biographical availability). I find that perceived financial loss predicts both protest participation and support, but only if individuals believe their losses to be greater than the losses of others. Moreover, political attitudes congruent with the political opportunities emerging in the crisis (and the resulting collective action framing)—that is, having a left-wing political attitude and belief in extensive corruption— predict protest participation and support.
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Knútsdóttir, Vera. "SPECTRAL MEMORIES: AESTHETIC RESPONSES TO THE FINANCIAL CRASH IN ICELAND 2008." Nordic Journal of Aesthetics 29, no. 60 (November 22, 2020): 116–39. http://dx.doi.org/10.7146/nja.v29i60.122844.
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In October 2008, one of the largest bank crashes in history struck Iceland, a country of three hundred and thirty five thousand inhab-itants. The aim of the article is to examine two cultural responses to the crash and the crisis that followed. More precisely, the aim is to analyse how the creation of the haunted house in I Remember You, a crash-horror story by crime writer Yrsa Sigurðardóttir, as well as the spectral half-built houses portrayed by visual artist Guðjón Ketilsson refer quite directly, yet spectrally, to the period. The spec-tral themes of the two works give the opportunity to discuss the moment following the crash as a moment of haunting—but who is haunted and by whom?
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Canarella, Giorgio, and Stephen M. Miller. "Inflation persistence and structural breaks." Journal of Economic Studies 43, no. 6 (November 14, 2016): 980–1005. http://dx.doi.org/10.1108/jes-10-2015-0190.
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Purpose The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for comparison, the USA, a non-IT country with a history of credible monetary policy. Design/methodology/approach First, the authors estimate inflation persistence in a rolling-window fractional-integration setting using the semiparametric estimator suggested by Phillips (2007). Second, the authors use tests for unknown structural breaks as a means to identify effects of the regime switch and the global financial crisis on inflation persistence. The authors use the sequences of estimated persistence measures from the first stage as dependent variables in the Bai and Perron (2003) structural break tests. Finally, the authors reapply the Phillips (2007) estimator to the subsamples defined by the breaks. Findings Four countries (Canada, Iceland, Mexico, and South Korea) experience a structural break in inflation persistence that coincide with the implementation of the IT regime, and three IT countries (Sweden, Switzerland, and the UK), as well as the USA experience a structural break in inflation persistence that coincides with the global financial crisis. Research limitations/implications The authors find that in most cases the estimates of inflation persistence switch from mean-reversion nonstationarity to mean-reversion stationarity. Practical implications Monetary policy implications differ between pre- and post-global financial crisis. Social implications Global financial crisis affected the persistence of inflation rates. Originality/value First paper to consider the effect of the global financial crisis on inflation persistence.
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Erlingsson, Gissur Ó., Jonas Linde, and Richard Öhrvall. "Distrust in Utopia? Public Perceptions of Corruption and Political Support in Iceland before and after the Financial Crisis of 2008." Government and Opposition 51, no. 4 (March 31, 2015): 553–79. http://dx.doi.org/10.1017/gov.2014.46.
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In the middle of the first decade of the twenty-first century Iceland was ranked as the least corrupt country in the world by Transparency International and enjoyed top positions in most comparative indices of governance and development. In 2008 the banking system collapsed and the country found itself in a serious financial crisis, a crisis which some observers believe was caused by clientelism and other forms of behaviour related to corruption. This article sets out to analyse how the crisis affected general political support and, in particular, the importance of perceptions of corruption in that process. Using survey data we show that political support plummeted after the crisis and that public evaluations of the extent of corruption became the most important determinant of support. The results have implications for how we ought to approach the issue of corruption, even in so-called ‘least corrupt’ settings. The findings also call into question the validity and reliability of frequently used measures of corruption and governance.