Budgetary Discipline and Internal Devaluation ? Estonian Method to Overcome the Crisis
DOI:
https://doi.org/10.12775/EQUIL.2014.008Keywords:
internal devaluation, budgetary adjustments, competitiveness, crisisAbstract
The purpose of this article is to outline the main reasons and effects of the Estonian adjustments in response to the global financial and economic crisis. Estonia chose significant budgetary savings, in contrast with most other countries stimulating their economies by expansionary fiscal policy and leading to fiscal imbalances and growing public debts. Estonia did not carry out a devaluation of its currency, but restored competitiveness through internal devaluation. This strategy allowed Estonia to maintain a fixed exchange rate, fulfill the Maastricht criteria and adopt the single currency. As a result, Estonia has increased the stability of its economy, restoring and enhancing confidence among investors. At the same time, the Estonian strategy confirmed the existence of non-Keynesian effects ? the positive economic results of public spending reduction.
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Erixon F. (2010), Baltic economic reforms: a crisis review of Baltic economic policy, ?Ecipe Working Paper? No. 04.
Giavazzi F., T. Jappelli, M. Pagano (2000), Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries, ?NBER Working Paper? No. 7460, http://dx.doi.org/10.1016/S0014-2921(00)00038-6
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IMF (2009), Republic of Estonia: Financial System Stability Assessment, ?IMF Country Report? No. 09/89.
Kosiedowski W. (1996), Piec lat reform w postradzieckich państwach bałtyckich ? próba podsumowania [in:] Transformacja społeczno-gospodarcza postkomunistycznych państw bałtyckich, UMK Toruń.
Knöbl A., A. Sutt, B. B. Zavoiceo (2002), The Estonian Currency Board: Its Introduction and Role in the Early Success of Estonia's Transition to a Market Economy, ?IMF Working Paper? No. 96.
Kuczyński G. (2003), Estonia pod rządami prawicy, ?Międzynarodowy Przegląd Polityczny?, nr 4.
Lipset S. M., G. S. Lenz (2003), Korupcja, kultura i funkcjonowanie rynków, [in:] L.E. Harrison, S. Huntington (ed.) Kultura ma znaczenie. Jak wartości wpływają na rozwój społeczeństw, Zysk i s-ka, Poznan.
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Pautola N. (1997), Fiscal Transition in the Baltics [in:] Review of Economies in Transition no. 2, Bank of Finland.
Purfield C., C. Rosenberg (2010), Adjustment under a Currency Peg: Estonia, Latvia and Lithuania during the Global Financial Crisis 2008?09, ?IMF Working Paper? No. 213.
Roman S. (2007), Web rumor sparks weekend currency panic, ?The Baltic Times?, November 28.
Rzonca A., P. Ci_kowicz (2005), Non-keynesian effects of fiscal contraction in new member states, ?ECB Working Paper Series? No. 519.
Siarkiewicz P. (2011), Rządząca centroprawica wygrywa wybory parlamentarne w Estonii, Ośrodek Studiów Wschodnich, 2011-03-09, www.osw.waw.pl
Updated Convergence Programme of the Republic of Estonia (2010), Tallin.
Sepp U., Lättemäe R., Randveer M. (2002), The History und Sustainability of the CBA in Estonia [in]: Sepp U., Randveer M., (ed.), Alternative Monetary Regimes in Entry to EMU, Bank of Estonia, Tallinn.
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Published
2014-06-30
How to Cite
Baran, B. (2014). Budgetary Discipline and Internal Devaluation ? Estonian Method to Overcome the Crisis. Equilibrium. Quarterly Journal of Economics and Economic Policy, 9(2), 9–23. https://doi.org/10.12775/EQUIL.2014.008
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Section
Macroeconomic Factors Influencing Short and Long-term Growth
