Learning from the “worst behaved”: Iceland's financial crisis and the Nordic comparison

This article explores how the financial crisis in 2008 could have been partially avoided by Iceland through observing the warning signs. Iceland experienced the harshest consequences from the financial crisis in the Western world, such as the total collapse of its banking sector. This article compares the prelude of Iceland's financial crisis to the Scandinavian one, less than 20 years ago, providing an understanding of the sources of the crisis and its impact. Results show that signs of overexpansion in Iceland were clear and numerous. Iceland's structural weaknesses resemble many other badly hit countries, simply more extreme. © 2011 Wiley Periodicals, Inc.