Post Crisis “Success” Stories? Economic Outcomes And Social Progress In Iceland And Latvia
The global crisis hit hard in Iceland and Latvia. Economic development prior to the crisis, as well as response to the crisis, was different in these two countries, also yielding different results. Prior to the crisis both countries privatized their banking system. In Iceland the banks were sold to local investors. The Latvian banks were primarily owned by international investors. During the crisis Iceland nationalized its largest banks. In Latvia the foreign owned banking system survived. In Iceland a large currency depreciation took place that boosted exports and mitigated the GDP decline. In Latvia the national currency is linked to the Euro and did not depreciate and Latvia suffered a large GDP decline with high unemployment. Thus both the privatization of the banking system prior to the crisis was very different as well as the response to the crisis. The post crisis economic situation in Latvia and Iceland is also different. Latvia’s reform program has been characterized by austerity while the adjustment in Iceland seems much milder, e.g. with lower unemployment. Iceland seems to have been successful in protecting its social fabric while the human costs of adjustment seem high in Latvia. The fact that these two countries responded so differently to the crisis makes a comparative case study feasible. While this study focuses on Iceland and Latvia it can also yield interesting results for other cases. Important lessons can be learned about the effects of different policy responses during times of crisis. This comparative case study is based on a review of theoretical literature, interviews, secondary data and the author’s previous experience as a staff member of the World Bank in Latvia and as Special Advisor to the Foreign Minister of Iceland.
|Date of creation:||Dec 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.biceps.org|
Postal:Strelnieku iela 4a, Riga, LV-1010
Phone: +371 67039320
Fax: +371 67039318
Web page: http://www.sseriga.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anders Aslund & Valdis Dombrovskis, 2011. "How Latvia Came through the Financial Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6024.
When requesting a correction, please mention this item's handle: RePEc:bic:opaper:9. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lelde Jakobsone)
If references are entirely missing, you can add them using this form.