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Price Dynamics in Latvia - Experience and Future Prospects

Author

Listed:
  • Martins Bitans

    (Bank of Latvia)

  • Dace Slakota

    (Bank of Latvia)

  • Ivars Tillers

    (Bank of Latvia)

Abstract

The Latvian experience shows that the central bank's successful monetary policy, together with the government's prudent policies, helps to reduce inflation. Due to Latvia's small size and high degree of openness of its economy, the exchange rate plays a significant role in determining inflation in the country. The Bank of Latvia's interim objective - the stability of the exchange rate - has been the key to achieving and maintaining price stability. In light of the fact that many factors that determine inflation in Latvia are beyond the central bank's control, the pursuit of a strategy based on inflation targeting appears to be difficult.

Suggested Citation

  • Martins Bitans & Dace Slakota & Ivars Tillers, 2001. "Price Dynamics in Latvia - Experience and Future Prospects," Working Papers 2001/01, Latvijas Banka.
  • Handle: RePEc:ltv:wpaper:200101
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    References listed on IDEAS

    as
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    3. Takatoshi Ito & Peter Isard & Steven Symansky, 1999. "Economic Growth and Real Exchange Rate: An Overview of the Balassa-Samuelson Hypothesis in Asia," NBER Chapters,in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 109-132 National Bureau of Economic Research, Inc.
    4. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April.
    5. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
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    7. Quinn, Terry & Kenny, Geoff & Meyler, Aidan, 1999. "Inflation Analysis: An Overview," MPRA Paper 11361, University Library of Munich, Germany.
    8. Frederic S Mishkin, 1997. "Strategies for Controlling Inflation," RBA Annual Conference Volume,in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
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    12. Alf Vanags, 1998. "Macroeconomic stabilisation and central bank policy in Latvia," Post-Communist Economies, Taylor & Francis Journals, vol. 10(2), pages 203-215.
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    Citations

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    Cited by:

    1. García Solanes José, 2008. "Real Exchange Rate Appreciation in Central and Eastern European Countries. Why the Balassa-Samuelson Effect Does Not Explain the Whole Story," Working Papers 2010100, Fundacion BBVA / BBVA Foundation.
    2. Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
    3. Masso, Jaan & Staehr, Karsten, 2005. "Inflation dynamics and nominal adjustment in the Baltic States," Research in International Business and Finance, Elsevier, vol. 19(2), pages 281-303, June.

    More about this item

    Keywords

    monetary policy; inflation; Phillips curve;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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