More On Iceland
I am not sure why it has rallied so much recently (if anyone has a clue, then please e-mail me). But at any rate, the recent currency movements aren’t going to provide any relief. While it will raise the seriously depressed level of domestic purchasing power, it will also reduce net exports. And because of the extra exchange rate uncertainty, and the disruptiveness of large and unexpected changes, this introduces it isn't going to be a zero-sum game. It will instead cause a reduction in total output.