1. 1 CARRY TRADE AND REGIONS HEINER FLASSBECK Director Division on Globalization and Development Strategies 2007

2. 2 YEN-CARRY TRADE ON THE ICELANDIC KRONA, US DOLLAR AND BRAZILIAN REAL, 2005-2007 Note: A positive change in the exchange rate means an appreciation of the corresponding currency vis-à-vis the yen.

3. 3 YEN-CARRY TRADE ON THE ICELANDIC KRONA, US DOLLAR AND TURKEY LIRA, 2005-2007

4. 4 CARRY TRADE AND REGIONS HEINER FLASSBECK Director Division on Globalization and Development Strategies 2010

5. 5 CARRY TRADE OPPORTUNITIES OF THE ICELANDIC KRONA VIS-À-VIS THE DOLLAR, 2005–FEBRUARY 2010

6. 6 CARRY TRADE OPPORTUNITIES OF SELECTED CURRENCIES VIS-À-VIS THE DOLLAR, 2005–FEBRUARY 2010

7. 7 UNCOVERED INTEREST RETURNS, EXCHANGE-RATE CHANGES, INFLATION AND INTEREST RATE DIFFERENTIALS, 1995-2010 ICELAND

8. 8 UNCOVERED INTEREST RETURNS, EXCHANGE-RATE CHANGES, INFLATION AND INTEREST RATE DIFFERENTIALS, 1995-2010 BRAZIL

9. 9 UNCOVERED INTEREST RETURNS, EXCHANGE-RATE CHANGES, INFLATION AND INTEREST RATE DIFFERENTIALS, 1995-2010 TURKEY

10. 10 UNCOVERED INTEREST RETURNS, EXCHANGE-RATE CHANGES, INFLATION AND INTEREST RATE DIFFERENTIALS, 1995-2010 CHINA

11. The way out: 1. Get interest rates down 2. Contain inflation by incomes policy 3. Keep the value of the Krona low 4. Preserve the current account surplus by all means 5. Stimulate the domestic economy by expansionary monetary policy including by direct financing of government investment 6. Try to find an agreement with foreign creditors to repay the debt over very long periods (30 to 40 years) and explain to them that Iceland needs current account surpluses for this time and growth to be able to service its debt 11

12. 12 Nominal unit labour costs 1 in Germany and other EMU-member countries 2 since 1999

13. 13 UNCOVERED INTEREST RETURNS, EXCHANGE-RATE CHANGES, INFLATION AND INTEREST RATE DIFFERENTIALS, 1996-2006 EASTERN EUROPE Speculation opportunities, appreciation trend and volatility persist despite the reduction in interest rates.

14. 14 UNCOVERED INTEREST RETURNS, EXCHANGE-RATE CHANGES, INFLATION AND INTEREST RATE DIFFERENTIALS, 1996-2006 ASIA Little speculation opportunities, moderate average appreciation and volatility.