please summarize/respond:

The question that I chose to answer was, "Do you think a country the size of Iceland is more or less sensitive to the potential impacts of global capital movements?" I think that when you have a nation that has only 300,000 people and is very small in land mass such as Iceland, you are going to be very much affected by global capital movements. I think that Iceland is also in a unique position when it comes to their impact. Iceland is very much influenced by the European Union, so they are tied to a much larger economic superpower. Iceland has an economy that is built around 3 main areas: fishing, aluminum, and tourism (Iceland). This means that they are just not going to command a world presence. When looking at the case study their government moved to deregulation of the banks and saw an opportunity to become a wealthy nation by offering high interest rates which would draw large foreign investments. They tried to become a major player in the global financial markets and even the global credit agencies gave them a AAA rating (Eiteman et al., 2019). The problem became when the people started to leave behind the jobs that they had relied on for decades and started to cater their policies and economy to other foreign nations. This resulted in not making sure to take care of your own nation.

The results speak for themselves in the crash of 2008. You had a small nation that wanted to become rich and decided to become bankers. These high interest rates that once had been such a blessing during the crash were now a curse. When the crash hit those rates now prevented any form of renewal-mortgage loans were either impossible to get or impossible to afford, business loans were too expensive given the new limited business outlook (Eiteman et al., 2019). Since the small nation had all become bankers, they were all out of the job when the banks collapsed. They then faced high inflation, so the banks tried to counter it with higher interest rates. It just keeps leading Iceland back to these same problems. When they needed help from the global financial community they were left in the cold. This is not surprising since in 2003 the IMF had written a paper about smaller developing nations and how they would deal with global financialization. The paper said, "the proliferation of financial and currency crises among developing economies is often viewed as a natural consequence of the 'growing pains' associated with financial globalization" (Prasad et al., 2003). When the larger nations of the world see your problems as just "growing pains" then small nations really don't have a chance. The crash of 2008 hit the largest economies in the world and brought them to their knees, and Iceland certainly had no chance to survive. I think had they not moved into the larger global markets then they probably would have done much better in 2008.

References

Eiteman, D., Stonehill, A., & Moffett, M. (2019). Multinational business finance. Pearson.

Iceland (ISL) exports, imports, and trade partners. OEC. Retrieved March 2, 2022, from https://oec.world/en/profile/country/isl

Prasad, E. Rogoff, K. Wei, S., & Kose, M. (2003). Effects of financial globalization on developing countries: Some empirical evidence -- IMF occasional paper no. 220. International Monetary Fund. Retrieved March 2, 2022, from https://www.imf.org/external/pubs/nft/op/220/index.htm