Iceland krona vincent wedelich

1. Iceland KrónaIceland Króna
International Finance 6333International Finance 6333
By: Vincent W. WedelichBy: Vincent W. Wedelich
Professor: Dr. Michael K. Bourke PhDProfessor: Dr. Michael K. Bourke PhD

2. People have inhabited Iceland forPeople have inhabited Iceland for
over 1000 years.over 1000 years.
Iceland is a large island in Europe, and is located in
the North Atlantic Ocean, just south of the Artic Circle.

3. • The króna is the current currency of IcelandThe króna is the current currency of Iceland
• The króna coin is in 1, 10, 50, and 100The króna coin is in 1, 10, 50, and 100
denominations.denominations.
• The króna banknote is in 500, 1000, 2000, andThe króna banknote is in 500, 1000, 2000, and
5000 denominations.5000 denominations.
• 1/100th of a króna is the eyrir, plural aurar.1/100th of a króna is the eyrir, plural aurar.

4. • The population of Iceland is approximatelyThe population of Iceland is approximately
300,000 people.300,000 people.
• The vast majority of the people live in theThe vast majority of the people live in the
lowlands along the southern coastlines.lowlands along the southern coastlines.

5. IndustryIndustry
• Fishing 13%Fishing 13%
• Industry: 21%Industry: 21%
• Services: 64%Services: 64% 0
10
20
30
40
50
60
70
Percent
Fishing
Industry
Services

6. • Iceland has deposits of sulfur, iron,Iceland has deposits of sulfur, iron,
copper, gold, and coal; mining thesecopper, gold, and coal; mining these
minerals is hard and expensive becauseminerals is hard and expensive because
of the harsh climatic conditions of Iceland.of the harsh climatic conditions of Iceland.
• Iceland does however have a thrivingIceland does however have a thriving
aluminum industry.aluminum industry.

7. • Iceland’s economy is based primarily onIceland’s economy is based primarily on
renewable resources.renewable resources.
• The homes are heated by a geothermalThe homes are heated by a geothermal
system the geothermal system alsosystem the geothermal system also
provides electrical power.provides electrical power.

8. • The Central Bank ofThe Central Bank of
Iceland is the issuingIceland is the issuing
authority of the króna.authority of the króna.
• Inflation target 2.5%Inflation target 2.5%
CBI's interest rates
Policy rate 13.75%
Overnight 15.25%
Current account 13.25%
12
12.5
13
13.5
14
14.5
15
15.5
Percent
Policy Rate
Overnight
Current Acct

9. • One of the Central Bank of Iceland´s mainOne of the Central Bank of Iceland´s main
tasks is to promote an efficient and safetasks is to promote an efficient and safe
financial system, including domesticfinancial system, including domestic
payment systems and foreign paymentpayment systems and foreign payment
intermediation.intermediation.

10. • In mid August of 2006 the inflation rateIn mid August of 2006 the inflation rate
was approximately 8.6% and it waswas approximately 8.6% and it was
anticipated to rise to 11% by the end ofanticipated to rise to 11% by the end of
the year.the year.

11. • The central bank raised its estimate forThe central bank raised its estimate for
inflation 2008 to 4.5 percent from the 3.4inflation 2008 to 4.5 percent from the 3.4
percent forecast in March, even after thepercent forecast in March, even after the
economy contracted for the first time ineconomy contracted for the first time in
three years in the first quarter.three years in the first quarter.

12. • Consumer prices, excluding the impact ofConsumer prices, excluding the impact of
a March cut in value-added taxes, rose ana March cut in value-added taxes, rose an
annual 5.8 percent in June, compared withannual 5.8 percent in June, compared with
the target of 2.5 percent.the target of 2.5 percent.

13. • ``Inflation has declined more slowly than``Inflation has declined more slowly than
the central bank forecast at the end ofthe central bank forecast at the end of
March,'' the Reykjavik-based bank said inMarch,'' the Reykjavik-based bank said in
a statement today. ``The current forecasta statement today. ``The current forecast
indicates that it will not be possible toindicates that it will not be possible to
lower the policy rate until the first half oflower the policy rate until the first half of
2008.''2008.''

14. • Historically the Iceland currency has beenHistorically the Iceland currency has been
volatile, and there have been recentvolatile, and there have been recent
discussions of adopting the EURO as thediscussions of adopting the EURO as the
new currency.new currency.

15. • Inflation risks still exist.Inflation risks still exist.
• Higher wage demands could makeHigher wage demands could make
considerably higher interest ratesconsiderably higher interest rates
necessary over the longer term.necessary over the longer term.

22. • Questions???Questions???