Impact of the Euro Adoption on the Economy of Latvia

Martins Bitans and Egils Kauzens
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Martins Bitans: Bank of Latvia
Egils Kauzens: Bank of Latvia

No 2004/02, Working Papers from Latvijas Banka

Abstract: In the past decade, Latvia's macroeconomic structure and the financial system have undergone momentous and radical changes, and the experience gained so far supports the assumption that the economy has been able to adjust effectively to changes in external environment. The calculations based on the gravity model analysis demonstrate that over longer horizons Latvia's GDP might be up to 19% higher than under a hypothetical scenario of Latvia preserving its national currency. Several indicators of the national structural development (structural changes of GDP sectors, structure of foreign trade broken down by trade partner and main commodity group, etc.) and the analysis of cyclical economic volatility show that in terms of real convergence Latvia often differs substantially from large euro area countries and only on few occasions Latvia's respective indicators display close similarity to the indicators of countries known as the periphery. It does not necessarily imply that along with the euro adoption the impact and periodicity of asymmetric shocks in Latvia are going to increase.

Keywords: euro area enlargement; euro adoption; convergence; Maastricht; European Union (search for similar items in EconPapers)
JEL-codes: E42 E58 F33 F42 (search for similar items in EconPapers)
Date: 2004-10-12
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ltv:wpaper:200402

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