IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2010-213.html
   My bibliography  Save this paper

Adjustment Under a Currency Peg: Estonia, Latvia and Lithuania During the Global Financial Crisis 2008-09

Author

Listed:
  • Miss Catriona Purfield
  • Mr. Christoph B. Rosenberg

Abstract

The paper traces the Baltics’ adjustment strategy during the 2008-09 global financial crisis. The abrupt end to the externally-financed domestic demand boom triggered a severe output collapse, bringing per capita income levels back to 2005/06 levels. In response to this shock, the Baltics undertook an internal devaluation that relied on unprecedented fiscal and nominal wage adjustment, steps to preserve financial sector stability as well as complementary efforts to facilitate voluntary private debt restructuring. One-and-half years on, the strategy is making good progress but not yet complete. Confidence in the exchange rate was maintained, the banking system was supported by its parent banks, external imbalances and inflation have largely disappeared, competitiveness is improving, and fiscal deficits are gradually being brought back towards pre-crisis levels. However, amid record levels of unemployment, further reforms are needed to foster a return to more balanced growth, fiscal sustainability, and a healthier banking system.

Suggested Citation

  • Miss Catriona Purfield & Mr. Christoph B. Rosenberg, 2010. "Adjustment Under a Currency Peg: Estonia, Latvia and Lithuania During the Global Financial Crisis 2008-09," IMF Working Papers 2010/213, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/213
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=24217
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert Sierhej & Mr. Christoph B. Rosenberg, 2007. "Interpreting EU Funds Data for Macroeconomic Analysis in the New Member States," IMF Working Papers 2007/077, International Monetary Fund.
    2. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 884-910, December.
    3. Mr. Adalbert Knöbl & Mr. Richard D Haas, 2003. "IMF and the Baltics: A Decade of Cooperation," IMF Working Papers 2003/241, International Monetary Fund.
    4. Ms. Cemile Sancak & Jing Xing & Ricardo Velloso, 2010. "Tax Revenue Response to the Business Cycle," IMF Working Papers 2010/071, International Monetary Fund.
    5. Ms. Valerie Herzberg, 2010. "Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries," IMF Working Papers 2010/250, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sandrine LEVASSEUR, 2012. "Labour market adjustments in Estonia during the 2008/2011 crisis," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 3, pages 123-143, June.
    2. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    3. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    4. Sandrine Levasseur, 2011. "Labour market adjustments in Estonia during the global crisis," SciencePo Working papers Main hal-01069525, HAL.
    5. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    6. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    7. repec:cfe:wpcefa:2014_07 is not listed on IDEAS
    8. Emilie Jašová & Klára Čermáková & Božena Kadeřábková & Pavel Procházka, 2016. "Působení institucionálních faktorů na strukturální a cyklickou nezaměstnanost v zemích Visegrádské skupiny [Influence of Institutional Factors on Structural and Cyclical Unemployment in the Countri," Politická ekonomie, Prague University of Economics and Business, vol. 2016(1), pages 34-50.
    9. Valentine Fays & Benoît Mahy & François Ryckx, 2024. "Do migrants displace native-born workers on the labour market? The impact of workers’ origin," LIDAM Discussion Papers IRES 2024004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Dabusinskas, Aurelijus & Rõõm, Tairi, 2011. "How wages respond to shocks: asymmetry in the speed of adjustment," Working Paper Series 1340, European Central Bank.
    11. MAIMOUNA DIAKITE & Jean-François BRUN, 2016. "Tax Potential and Tax Effort: An Empirical Estimation for Non-Resource Tax Revenue and VAT’s Revenue," EcoMod2016 9537, EcoMod.
    12. Michael Böhm & Daniel Metzger & Per Strömberg, 2022. "“Since You’re So Rich, You Must Be Really Smart”: Talent, Rent Sharing, and the Finance Wage Premium," ECONtribute Discussion Papers Series 147, University of Bonn and University of Cologne, Germany.
    13. Jed Armstrong & Miles Parker, 2016. "How wages are set: evidence from a large survey of firms," Reserve Bank of New Zealand Discussion Paper Series DP2016/03, Reserve Bank of New Zealand.
    14. Steven J. Davis & Pawel M. Krolikowski, 2023. "Sticky Wages on the Layoff Margin," NBER Working Papers 31528, National Bureau of Economic Research, Inc.
    15. Kasselaki, Maria Th. & Tagkalakis, Athanasios O., 2016. "Fiscal policy and private investment in Greece," International Economics, Elsevier, vol. 147(C), pages 53-106.
    16. Kéa Baret & Amélie Barbier-Gauchard & Théophilos Papadimitriou, 2021. "Forecasting the Stability and Growth Pact compliance using Machine Learning," Working Papers of BETA 2021-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    17. Paula Garda & Volker Ziemann, 2014. "Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics," OECD Economics Department Working Papers 1115, OECD Publishing.
    18. Andrew Snell & Heiko Stuber & Jonathan Thomas, 2018. "Downward Real Wage Rigidity and Equal Treatment Wage Contracts: Theory and Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 265-284, October.
    19. Andrea Guido & Alejandro Martinez-Marquina & Ryan Rholes, 2022. "Reference Dependence and the Role of Information Frictions," GREDEG Working Papers 2022-17, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    20. Eva Branten & Ana Lamo & Tairi Room, 2018. "Nominal wage rigidity in the EU countries before and after the Great Recession: evidence from the WDN surveys," Bank of Estonia Working Papers wp2018-03, Bank of Estonia, revised 15 Jun 2018.
    21. Ronchi, Maddalena & di Mauro, Filippo, 2017. "Wage Bargaining Regimes and Firms' Adjustments to the Great Recession," IWH-CompNet Discussion Papers 1/2017, Halle Institute for Economic Research (IWH).
    22. Edo Anthony, 2015. "The Impact of Immigration on Native Wages and Employment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1151-1196, July.
    23. Jie Li & Alice Y. Ouyang, 2018. "Stock and Labor Market Synchronization and Income Inequality: Evidence from OECD Countries," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 9(01n02), pages 1-20, February.
    24. Aida Caldera Sánchez & Morten Rasmussen & Oliver Röhn, 2016. "Economic Resilience: What Role for Policies?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-44, June.
    25. Andrea Bassanini, 2012. "Aggregate Earnings and Macroeconomic Shocks: the Role of Labour Market Policies and Institutions," Review of Economics and Institutions, Università di Perugia, vol. 3(3).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2010/213. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.