Ireland vs Iceland

Paul Krugman has a superb post comparing the two countries.

In a nutshell, Ireland has been orthodox and responsible — guaranteeing all debts, engaging in savage austerity to try to pay for the cost of those guarantees, and, of course, staying on the euro. Iceland has been heterodox: capital controls, large devaluation, and a lot of debt restructuring — notice that wonderful line from the IMF, above, about how “private sector bankruptcies have led to a marked decline in external debt”. Bankrupting yourself to recovery! Seriously.

And guess what: heterodoxy is working a whole lot better than orthodoxy.

Really interesting. A rise of heterodox policies…All these things like fiscal policy, capital controls etc were considered as a strict no-no till now. Gulzar too has a superb post on how Ireland once a Celtic tiger could be a part of Museum now.

Also read his post on devaluation in times of crisis. He says he does not recall any crisis post WW II where growth has happened without devaluing its currency.

One Response to “Ireland vs Iceland”

  1. Tweets that mention Ireland vs Iceland « Mostly Economics -- Says:

    […] This post was mentioned on Twitter by Rajeev Mantri, Rahul Deodhar. Rahul Deodhar said: Ireland vs Iceland […]

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