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Phoenix from the Ashes: The Recovery of the Baltics from the 2008/2009 Crisis

Author

Listed:
  • Bas B. Bakker

    (IMF Regional Office for Central and Eastern Europe)

  • Marta Korczak

    (IMF Regional Office for Central and Eastern Europe)

Abstract

This paper argues that the deep bust and strong recovery of the Baltics were to large extent the result of the sharp adjustment the private sector was forced to go through between 2007 and 2009. When private capital flows suddenly stopped, firms were forced to quickly reduce their net lending gap. They slashed investment and cut costs, including by shedding labor. This led to a deep recession, but also to a sharp improvement in profitability and competitiveness, which set the stage for a subsequent export boom.

Suggested Citation

  • Bas B. Bakker & Marta Korczak, 2017. "Phoenix from the Ashes: The Recovery of the Baltics from the 2008/2009 Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(4), pages 520-544, December.
    • Handle: RePEc:pal:compes:v:59:y:2017:i:4:d:10.1057_s41294-017-0034-4
    DOI: 10.1057/s41294-017-0034-4
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    References listed on IDEAS

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    1. Mr. Christian H Ebeke & Greetje Everaert, 2014. "Unemployment and Structural Unemployment in the Baltics," IMF Working Papers 2014/153, International Monetary Fund.
    2. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 325-388.
    3. International Monetary Fund, 2010. "The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?," IMF Working Papers 2010/130, International Monetary Fund.
    4. Miss Catriona Purfield & Mr. Christoph B. Rosenberg, 2010. "Adjustment Under a Currency Peg: Estonia, Latvia and Lithuania During the Global Financial Crisis 2008-09," IMF Working Papers 2010/213, International Monetary Fund.
    5. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery: Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 325-388.
    6. Anders Aslund & Valdis Dombrovskis, 2011. "How Latvia Came through the Financial Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6024, October.
    7. Holger Wolf, 2016. "Currency boards as a path towards the Eurozone: lessons from the Baltics," International Economics and Economic Policy, Springer, vol. 13(1), pages 45-57, January.
    8. Ms. Valerie Herzberg, 2010. "Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries," IMF Working Papers 2010/250, International Monetary Fund.
    9. Holger Wolf, 2016. "Currency boards as a path towards the Eurozone: lessons from the Baltics," International Economics and Economic Policy, Springer, vol. 13(1), pages 45-57, January.
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    More about this item

    Keywords

    Baltics; Crisis; Boom-bust; Sudden stop; Capital flows; Currency board;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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