The collapse of icelandic banks: Was it really a surprise?

Abstract

The economic crisis that burst in 2007 was one of the harshest-if not the harshest- in the recent history. The purpose of this article is to examine the factors that caused the 2007 crisis and why Iceland was so badly affected. Iceland is one of first the countries in Europe that experienced the crisis and its consequences. On October 2008, the country saw the financial system collapsing. Iceland experienced an economic bubble which can be related and compared to the one that took place in the USA. The great difference, though, was that the enormity of the Icelandic crisis could not be compared to its small size.