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This paper analyzes competitiveness in the Baltics in the run-up to European Union accession. Several factors appear to have driven movements in equilibrium real exchange rates in the Baltics since the start of the transition process. In the earlier years of transition, price liberalization, increased demand for services and other nontradables, and shifts in domestic production and exports toward higher valued-added products contributed to real appreciation through higher measured inflation. The strength of the real appreciation during these years appears to also reflect the correction of an initial undervaluation of exchange rates.

Foreign Exchange --- Inflation --- Production and Operations Management --- Macroeconomics: Production --- Price Level --- Deflation --- Currency --- Foreign exchange --- Macroeconomics --- Real exchange rates --- Exchange rates --- Productivity --- Real effective exchange rates --- Production --- Prices --- Industrial productivity --- Estonia, Republic of

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This paper analyzes the role of regional arrangements in trade and foreign direct investment (FDI) performance in the Baltics. While progress with transition is a key determinant of trade and FDI performance, regional arrangements with Western Europe have helped develop trade and transfer of technology, but have not yet led to export-related foreign direct investment toward the European Union. The main reasons for this are policy uncertainties, need for more progress with transition, and restrictions in the trade agreements, especially on the European Union side. Intra-Baltic integration has not yet led to substantial trade and FDI growth between the Baltics.

Exports and Imports --- Trade Policy --- International Trade Organizations --- Economic Integration --- Trade: General --- International Investment --- Long-term Capital Movements --- International economics --- Finance --- Exports --- Trade liberalization --- Foreign direct investment --- Trade policy --- Trade barriers --- International trade --- Balance of payments --- Commercial policy --- Investments, Foreign --- Estonia, Republic of

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Between 2000 and 2007 nonfinancial private sector credit expanded rapidly in the Baltic countries, resulting in a non-negligible build-up of debt. Could this legacy debt hold back the economic recovery of the region? This paper analyzes the setting in each of the three countries and, with the help of an experimental Debt Overhang Index (DOI), draws tentative conclusions for domestic demand.

Accounting --- Corporate Finance --- Exports and Imports --- Macroeconomics --- International Lending and Debt Problems --- Macroeconomics: Consumption --- Saving --- Wealth --- Aggregate Factor Income Distribution --- Corporate Finance and Governance: General --- Public Administration --- Public Sector Accounting and Audits --- International economics --- Ownership & organization of enterprises --- Financial reporting, financial statements --- Debt burden --- Consumption --- Income --- Corporate sector --- Financial statements --- Debts, External --- Economics --- Business enterprises --- Finance, Public --- Estonia, Republic of --- Credit --- Credit control

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This Selected Issues paper and Statistical Appendix highlights that the real GDP growth in Latvia accelerated in the second half of 1997, and is estimated at 6 percent for the year. Growth was broad-based, with particularly strong performance in the services sector and construction, and has been led by increased investment, with real capital formation rising by an estimated 10 percent, and enhanced efficiency. Reflecting the strong economic growth, official unemployment has begun to decline, falling from 7½ percent in mid-year to 6.7 percent at end-January 1998.

Labor --- Macroeconomics --- Unemployment: Models, Duration, Incidence, and Job Search --- Wages, Compensation, and Labor Costs: General --- Labor Economics: General --- Demand and Supply of Labor: General --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labour --- income economics --- Labor markets --- Labor economics --- Labor market --- Economic theory --- Estonia, Republic of

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This paper discusses issues in calibrating the countercyclical capital buffer (CCB) based on a sample of EU countries. It argues that the main indicator for buffer decisions under the Basel III framework, the credit-to-GDP gap, does not always work best in terms of covering bank loan losses that go beyond what could be expected from economic downturns. Instead, in the case of countries with short financial cycles and/or low financial deepening such as transition and developing economies, the Basel gap is shown to work best when computed with a low, smoothing factor and adjusted for the degree of financial deepening. The paper also analyzes issues in calibrating an appropriate size of the CCB and, using a loss function approach, points to a tradeoff between stability of the buffer size and cost efficiency considerations.

Macroeconomics. --- Economics --- Financial Risk Management --- Macroeconomics --- Money and Monetary Policy --- Real Estate --- Business Fluctuations --- Cycles --- Financial Crises --- Housing Supply and Markets --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Economic & financial crises & disasters --- Property & real estate --- Monetary economics --- Credit gaps --- Financial crises --- Financial cycles --- Housing prices --- Credit --- Financial sector policy and analysis --- Prices --- Money --- Business cycles --- Housing --- Estonia, Republic of