‘Still some flaws’ in transmission mechanism – Icelandic report
Yield curve still "virtually flat" despite capital flow measures
The Central Bank of Iceland's experiment with capital flow measures may not yet have yielded the intended benefits, according to the central bank's latest monetary policy report, published on July 12.
The measures require 40% of capital inflows to be diverted to a special reserve account at the central bank, discouraging bond purchases and theoretically pushing yields higher. The report notes that although bond yields rose somewhat after the flow measures were implemented on June 4, the bond
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