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Are the Current Account Deficits in the Baltic States Sustainable?

Author

Listed:
  • Jorgen Drud Hansen

    (EuroFaculty Visiting Professor at Vilnius University)

  • Morten Hansen

    (EuroFaculty Visiting Professor at University of Latvia, Stockholm School of Economics in Riga)

Abstract

For almost a decade all three Baltic countries have witnessed substantial deficits on the current accounts of the balance of payments. This paper discusses whether this situation should be a matter of concern. Recent literature on the sustainability of balance of payments deficits is reviewed and put into a Baltic context. The main conclusion is that the recurrent large deficits in the Baltic countries pose a risk for the fixed exchange rate policies until the countries adopt the euro. In the longer term large deficits will influence the time path of convergence of living standards between the Baltic countries and the EU as a whole.

Suggested Citation

  • Jorgen Drud Hansen & Morten Hansen, 2004. "Are the Current Account Deficits in the Baltic States Sustainable?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 4(2), pages 5-24, July.
    • Handle: RePEc:bic:journl:v:4:y:2004:i:2:p:5-24
    as

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    File URL: https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2004.10840408
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    References listed on IDEAS

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    1. Egert, Balazs & Lommatzsch, Kirsten & Lahreche-Revil, Amina, 2006. "Real exchange rates in small open OECD and transition economies: Comparing apples with oranges?," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3393-3406, December.
    2. Benkovskis, Konstantins, 2005. "Econometric analysis and forecasting of Latvia's balance of payments," MPRA Paper 23274, University Library of Munich, Germany.

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