Bjorn Runar Gudmundsson’s research while affiliated with Petromodel and other places

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Publications (3)


Figure 2 Sectoral balances of the Icelandic economy
Figure 4 Real GDP
Figure 12 Loans breakdown
Figure 16 Net exports
Figure 17 Wealth

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Crises and capital controls in small open economies: a stock–flow consistent approach
  • Article
  • Full-text available

April 2019

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75 Reads

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2 Citations

European Journal of Economics and Economic Policies Intervention

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Bjorn Runar Gudmundsson

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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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Crises and capital controls in small open economies: a stock–flow consistent approach

February 2019

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63 Reads

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5 Citations

European Journal of Economics and Economic Policies Intervention

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.


Two thorns of experience: financialisation in Iceland and Ireland

July 2016

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75 Reads

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6 Citations

International Review of Applied Economics

We explain the 2008 crisis in Iceland and Ireland with an emphasis on the role financialisation played in destabilising these countries’ economies. The two small open economies share similarities in that both countries had capital inflows before the crisis, ending with a sudden stop. However, the mechanisms of the crisis, which induced the capital flows, the factors that influenced them and their effects on the real economy differed due to differences in currency regimes and the response to the crises. We investigate the link between financialisation and the transmission channels of financialisation on the macroeconomy, using ARDL methodology. Finally, we suggest policy prescriptions to limit the scale and scope of similar crises in the future while highlighting the institutional differences between the two economies.

Citations (3)


... This is one of the few behavioral equations which have been borrowed from a source that is not Godley and Lavoie (2012). Raza et al. (2019) develops an interesting, yet simple, behavioral equation for the firm's liability choice. We must also mention Nalin and Yajima (2022) ...

Reference:

WHEN MINSKY AND GODLEY MET THE DEPENDENTISTAS: THE CURRENCY HIERARCHY IN A STOCK-FLOW CONSISTENT MODEL
Crises and capital controls in small open economies: a stock–flow consistent approach

European Journal of Economics and Economic Policies Intervention

... Almost all models, presented in Table 4, have a rather more generic macroeconomic structure and thus they are able to assess a large variety of fiscal, monetary and financial operations. The only two models that examine very specific research questions are the model for Moldova (Le Heron/Yol 2019) and the model for Iceland (Raza et al. 2019). Both are in the reduced form. ...

Crises and capital controls in small open economies: a stock–flow consistent approach
  • Citing Article
  • February 2019

European Journal of Economics and Economic Policies Intervention

... 34 For an example, see the case of Iceland. See: Gudmundsson (2015) and Raza et al. (2016). Let us note that putting European debt-to-GDP rates altogether on a more sustainable path is of crucial importance since high discrepancies in Member States' indebtedness does also mean differing fiscal spaces deployable in mitigating shocks and to dynamise structural transformation (i.e., into green, inclusive and more sustainable growth/development). 35 The parasitic-like nature of the financial universe unleashed new systemic patterns: (i) the share of capital in national income has been rising, while that of the labour share has been declining since the 1970s (see Milanovic 2019, pp. ...

Two thorns of experience: financialisation in Iceland and Ireland
  • Citing Article
  • July 2016

International Review of Applied Economics