Decoupling from the East Toward the West? Analyses of Spillovers to the Baltic Countries

Author/Editor:

International Monetary Fund

Publication Date:

June 1, 2009

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses VAR models to examine the magnitude and sources of growth spillovers to the Baltics from key trading partners, as well asfrom the real effective exchange rate (REER). Our results show there are significant cross-country spillovers to the Baltics with those from the EU outweighing spillovers from Russia. Shocks to the REER generally depress growth in the Baltics, and this intensifies over time. We also find that financial and trade channels dominate the transmission of spillovers to the region which partly explains the realization of downside risks to the Baltics from the global slowdown.

Series:

Working Paper No. 09/125

Subject:

Baltics Commodity prices Cross country analysis Economic models Estonia European Union External shocks Financial crisis Latvia Lithuania Real effective exchange rates Regional shocks Russian Federation Spillovers Trade integration Vector autoregression

English

Publication Date:

June 1, 2009

ISBN/ISSN:

9781451872729/1018-5941

Stock No:

WPIEA2009125

Format:

Paper

Pages:

38

Please address any questions about this title to publications@imf.org