On a red light - Iceland's financial crisis and the Nordic experience

Abstract

Academics have in recent years compared financial crises in order to gain a better understanding of preceding circumstances. This paper explores whether Icelanders were oblivious to historical warning signals preceding the financial crisis in 2008. A specific focus is on whether Icelanders should have seen warning signals by exploring warning signs in other countries that have recently dealt with financial crises. This research compares the prelude of Iceland’s financial crisis to preceding circumstances of the Scandinavian crisis during the early 1990s. The result is that the characteristics showed remarkable similarities indicating that a deep crisis was brewing in Iceland. Classic symptoms of a prelude to a crisis were even more evident in Iceland.