Many transition economies have been unable to reduce inflation to low levels on a sustained basis. Monetary growth has been a dominant factor. Relative price adjustment and nominal wage shocks are also partly to blame, but their impact on inflation can be modified by monetary and exchange rate policy.
This 2014 Cluster Consultation report examines common themes and challenges facing the three Baltic countries—Estonia, Latvia, and Lithuania. It identifies common features and common challenges, and discusses policies—both national and joint—that could help to address these challenges. The Baltic economies have performed well during the last two decades. The global financial crisis exposed vulnerabilities that had built up in the Baltics, but the postcrisis recovery revealed inherent strengths as well. This report highlights that national policies are necessary to address all of the challenges, but collaboration is also important in some areas.