Boom and bust in the Baltic countries — Lessons to be learnt

Martin, Reiner

doi:10.1007/s10272-010-0340-9

Cited by 10 publications

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“…4 For a discussion of the credit boom in CEE countries seeBakker and Gulde-Wolf (2010). A Baltic-specific analysis is provided byMartin and Zauchinger, 2009.…”

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confidence: 99%

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

Purfield

Rosenberg²

2010

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. 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.

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“…4 For a discussion of the credit boom in CEE countries seeBakker and Gulde-Wolf (2010). A Baltic-specific analysis is provided byMartin and Zauchinger, 2009.…”

mentioning

confidence: 99%

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

Purfield

Rosenberg²

2010

IMF Working Papers

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“…Using ex-post cost of equity across all industry sectors in the Baltic countries, Mongrut, Paškevičius, Dubinskas, Kovalevskaja and Fuenzalida (2010) demonstrated that the cost of equity increased during the period 2005–2007, signalling that the Baltic country capital market was not conducive from a financing point of view. The Baltic countries experienced strong real GDP growth between the years 2000 and 2007 but post-2006–2007, the Baltics spiralled into recession (Martin, 2010). During the boom period, the real estate market in the Baltics was very expensive with the annual rate of bank lending rate being about 30–60 per cent, but ex-post real interest rates were close to zero or negative (accounting for deflation) and this led to rapid increase in credit growth by 2008 (Martin, 2010).…”

Section: Business Landscape In Baltic Countriesmentioning

confidence: 99%

“…The Baltic countries experienced strong real GDP growth between the years 2000 and 2007 but post-2006–2007, the Baltics spiralled into recession (Martin, 2010). During the boom period, the real estate market in the Baltics was very expensive with the annual rate of bank lending rate being about 30–60 per cent, but ex-post real interest rates were close to zero or negative (accounting for deflation) and this led to rapid increase in credit growth by 2008 (Martin, 2010). The study by Kenourgios and Samitas (2007) indicated that bank credit played an important role in fuelling economic development.…”

Section: Business Landscape In Baltic Countriesmentioning

confidence: 99%

“…The Scandinavian banks which had a major contribution became conscious of its credit bundles and asset base and retracted the supply of capital post-2008 (Martin, 2010). By the end of the boom period, the ratio of foreign currency lending to the private sector was 50–60 per cent for Lithuania, 80 per cent for Estonia and above 80 per cent for Latvia (Martin, 2010). The three Baltic countries like Ireland also decreased their labour wage rates and for Latvia, the drop was as high as 30 per cent.…”

Section: Business Landscape In Baltic Countriesmentioning

confidence: 99%

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International Business in Transitional and Emerging Economies: A Perspective of Latvia, Lithuania and Estonia with India

Bhattacharyya

irjevskis

Põlajeva

2018

South Asian Journal of Business and Management Cases

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Baltic countries, namely, Latvia, Lithuania and Estonia, the former Soviet states, are making a mark in the world economy. Like India, Baltic countries are contesting with other emerging economies to gain a share of the global market. Given this context, it is insightful to study how emerging economy firms are faring in transitional economies. The case, based upon secondary data sources, helps to comprehend the nature and extent of two-way international business between Latvia, Lithuania and Estonia with Indian firms and Indian market.

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“…In the capital markets, external financing continued to decline, with total gross capital inflows (syndicated bank lending, bond issuance, and equity initial public offerings) plummeting from $56. 6 Second, although government debt was negligible in 2008, the private sector had accumulated a substantial volume of short-term debt -in part because the policy of controlled appreciation of the ruble contributed to excessive foreign currency borrowing.26 Given that private capital inflows were mostly in the form of loans to firms and commercial banks, many of the commercial banks were heavily indebted, as they had borrowed from abroad at low interest rates. Therefore, even as the Russian government (in particular, Gazprom, the state-owned gas monopoly) was accumulating an impressive volume of foreign exchange, both state-owned corporations and private companies (in particular, the big-four of Gazprom, Rosneft, LUKoil, and Rostekhnologii) and banks were borrowing lavishly from abroad because dollar interest rates were much lower than ruble rates.27…”

Section: Russia Is Not Like the Rest Of Eastern Europementioning

confidence: 99%

Not an Exceptional Country: Russia and the Global Financial Crisis of 2008 – 2009

Sharma¹

2011

Mediterranean Quarterly

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What began as a downturn in the US housing sector in summer 2007 mushroomed into a global financial crisis by September 2008-the most severe since the Great Depression of the 1930s. Initially, Western European governments, including the Russian government, blamed the crisis on US financial excesses and felt that their economies would remain immune from the contagion. However, this proved to be a false comfort. The subprime-induced contagion spread to Europe with unprecedented ferocity, rapidly engulfing the entire continent. This essay explains why Russia, deemed to be the most immune, succumbed so quickly to the contagion, and includes lessons policymakers can learn from the Russian experience to better insulate their economies from the vagaries of the global financial markets. During the first and second quarters of 2008, as the subprime-induced financial crisis began to spread throughout the US financial system, Europeans remained confident that their economy would remain immune. German finance minister Peer Steinbruck boldly asserted that the financial crisis was an "American problem"-the fruit of Anglo-Saxon greed and inept regulation-that may very well cost the United States its "superpower status." Similar sentiments were echoed in other major European capitals.1 Italy's prime minister, Silvio Berlusconi, blamed the spreading crisis on the "speculative capitalism" of the United States; Gordon Brown, the British prime minister, noted that the crisis "has come from America"; the French leaders blamed the le capitalism sauvage of the Anglo-Saxons, especially its worship of the markets and the lack of business ethics and moral discipline; and the Kremlin simply dismissed the economic crisis as a Western problem that would leave Russia unscathed.2 In fact, in June 2008 Russian president Dmitry Medvedev even boasted that the Russian ruble would be the future reserve currency of Eurasia.3 Given this self-confidence, it is not surprising that when on 19 September 2008 the Bush administration led by Treasury secretary Hank Paulson finally cobbled together an unprecedented $700 billion "rescue plan" (to critics a "bailout plan") to help distressed US financial companies, the Europeans politely rebuffed pleas from the Americans for a joint US-European rescue effort to halt the downward economic spiral. Despite the bravado, the fact was that Europe was extremely vulnerable to the financial contagion. Indeed, Europe's smugness and complacency was painfully shattered, as beginning in the third quarter of 2008, country after country began to scramble to prevent a fast-moving credit crisis from bringing down major banks, wrecking financial markets, and negatively impacting national

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Boom and bust in the Baltic countries — Lessons to be learnt

Cited by 10 publications

References 0 publications

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

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

International Business in Transitional and Emerging Economies: A Perspective of Latvia, Lithuania and Estonia with India

Not an Exceptional Country: Russia and the Global Financial Crisis of 2008 – 2009

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