Republic of Latvia: Selected Issues

IMF Staff Country Reports, August 7, 2019

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Republic of Latvia: Selected Issues

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Bibliographic details

• Published: August 7, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781513510057.002

Analytical focus

• Analyses the implications of global value chains (GVC) participation for Latvia’s competitiveness and exposure to risks.
• Uses a structural model to:
  • Assess Latvia’s competitiveness through different real effective exchange rate (REER) measures.
  • Examine main factors behind differences in the REER measures.

Key findings

• The paper estimates the impact of an appreciation of the GVC related REER measure on:
  • value added export growth — finding sizable effects.
  • real GDP growth — finding sizable effects.
• A rapid labor market tightening could lead to:
  • erosion in competitiveness.
  • reduction in growth.
• Trade tension induced tariff hikes:
  • may have significant cost for Latvia, especially in terms of value added produced in the country.
  • are likely to have moderate costs for Latvia in terms of value added produced in the country. (This phrasing and assessment appear in the source text.)

Policy recommendations and mitigation options

• Strengthen competitiveness based on the REER and structural-model analysis.
• Policies aimed at:
  • enhancing product sophistication or quality.
  • export market diversification.
  • These measures could mitigate Latvia’s exposure to trade shocks in GVCs.

Subjects and keywords (as stated in source)

• Subjects: Anti-money laundering and combating the financing of terrorism (AML/CFT), Banking, Crime, Currencies, Foreign exchange, Money, Production, Productivity, Real effective exchange rates, Total factor productivity
• Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), Asia and Pacific, Baltics, CR, Currencies, Europe, firm, firm gain, Global, GVC participation, ISCR, micro firm, Productivity, Real effective exchange rates, REER index, Total factor productivity, VA REER appreciation, value-added REER, Western Europe, zombie firm

Republic of Latvia: Selected Issues, IMF Staff Country Reports 2019, 265.

Content in this bundle

• Republic of Latvia: Selected Issues; IMF Country Report No. 19/265 July 23, 2019
  • Republic of Latvia: Selected Issues; IMF Country Report No. 19/265 July 23, 2019 (Markdown version)
  • Republic of Latvia: Selected Issues; IMF Country Report No. 19/265 July 23, 2019 (PDF)