Republic of Latvia: Selected Issues

International Monetary Fund

No 2004/261, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper assesses whether Latvia’s strategy to enter ERM2 and adopt the euro is appropriate. The paper examines the possibility of an exchange rate misalignment from various perspectives. It considers different notions of the real effective exchange rate and competitiveness; deviations of the exchange rate from statistically defined equilibrium concepts; and the possibility that central bank foreign exchange interventions have maintained the exchange rate artificially away from equilibrium. The paper finds little evidence of a major misalignment. The paper also analyzes modeling inflation in Latvia.

Keywords: ISCR; CR; exchange rate; deficit; revenue elasticity; fiscal policy stance; GDP assumption; price level; production function approach; Credit; Fiscal stance; Exchange rates; Inflation; Potential output; Baltics; Eastern Europe (search for similar items in EconPapers)
Pages: 46
Date: 2004-08-16
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