Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212498 
Authors: 
Year of Publication: 
2001
Series/Report no.: 
BOFIT Discussion Papers No. 17/2001
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
The three Baltic countries have been able to combine, Estonia since 1992 and Latvia and Lithuania since 1994, (1) a fixed exchange rate, (2) liberalisation of the capital account before having a well-functioning and fully supervised financial system, and (3) very large current account deficits.At the same time they have gone through deep structural and institutional change, which has been even faster than in several other transition economies.How have they been able to manage such a combination of characteristics that would usually be regarded inconsistent? The answer is not in clever management or control of financial markets combined with sound fundamentals.Rather, the Baltic countries have lacked several such markets that might be sources of instability.There are hardly any inter-bank markets.Public debt is absent or relatively very small.After the boomlet of 1997, the Baltic stock exchanges have generally hibernated.Banking crises have been recurrent.Not only are these economies extremely small, their degree of monetisation is very low.There are very few assets and markets for speculative capital flows. Partially, this reflects sound fundamentals, but mostly it is an unintended consequence of policy decisions.One cannot expect the experience to be easily repeated in other countries.
Subjects: 
the Baltic countries
capital flows and controls
financial crises
currency boards
Persistent Identifier of the first edition: 
ISBN: 
951-686-816-9
Document Type: 
Working Paper

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