{
  "title": "Competitiveness and Productivity in the Baltics: Common Shocks, Different Implications",
  "publication": "IMF Working Papers, January 17, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/01/17/competitiveness-and-productivity-in-the-baltics-common-shocks-different-implications-561082",
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  "summary": "This paper examines competitiveness and productivity in the Baltics. Focusing on recent developments, it asks why Russia’s war in Ukraine led to a prolonged recession and strong decline in competitiveness in Estonia, while Latvia and Lithuania shielded their economies more effectively.",
  "sections": [
    {
      "heading": "Overview and research question",
      "content": "- Paper examines competitiveness and productivity in the Baltics, focusing on recent developments and asking why Russia’s war in Ukraine led to a prolonged recession and strong decline in competitiveness in Estonia, while Latvia and Lithuania shielded their economies more effectively.\n- Authors: Saioa Armendariz, Carlos de Resende, Alice Fan, Gianluigi Ferrucci, Bingjie Hu, Sadhna Naik, Can Ugur.\n- Date: January 17, 2025.\n- Series: IMF Working Papers, Working Paper No. 2025/018, Issue: 018, Volume: 2025, Pages: 46.\n- DOI: https://doi.org/10.5089/9798400299582.001\n- Stock No: WPIEA2025018\n- ISBN: 9798400299582\n- ISSN: 1018-5941"
    },
    {
      "heading": "Empirical findings on export performance and competitiveness",
      "content": "- Documents a deterioration in export performance across the region.\n- Constant share decomposition result:\n  - In Estonia, the declining export share has been mainly linked to a reduction in the “intensive margin”—interpreted as a sign of weakening external competitiveness and declining relative productivity.\n  - In Latvia and Lithuania, export share declines were not predominantly driven by the intensive margin in the same way.\n- Multivariate filtering techniques and estimates of the real effective exchange rates based on historical productivity trends, consistent with Balassa-Samuelson, confirm that differences in long-term total factor productivity growth have affected external competitiveness.\n- Comparative dynamics:\n  - Estonia experienced a post-GFC slowdown in productivity growth and real exchange rate appreciation that have eroded its competitive edge.\n  - Latvia and Lithuania displayed greater resilience, aided by more balanced real effective exchange rates.\n  - Lithuania additionally benefited from stronger corporate balance sheets."
    },
    {
      "heading": "Micro-econometric evidence and drivers of productivity",
      "content": "- A micro-econometric analysis reveals that resource misallocation, particularly in the services sector, has been a key driver of declining productivity in the region.\n- Emphasis on allocative efficiency: resource misallocation is central to the decline in productivity across the Baltics."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Findings underscore the need for targeted reforms to:\n  - Improve allocative efficiency.\n  - Boost productivity.\n  - Restore competitiveness in the Baltic region.\n- Policy focus implied by results:\n  - Address structural factors behind resource misallocation, especially in services.\n  - Strengthen factors that support balanced real effective exchange rates and corporate balance sheet resilience."
    },
    {
      "heading": "Keywords and subject areas",
      "content": "- Subject: Foreign exchange, Production, Productivity, Real effective exchange rates, Real exchange rates, Total factor productivity.\n- Keywords: Baltics, Competitiveness, export share, Export shares, Global, Productivity, productivity in the Baltic, productivity trend, Real effective exchange rates, Real exchange rates, resource misallocation, TFP deceleration, TFP dynamics, Total factor productivity.\n\nSource: IMF Working Papers — \"Competitiveness and Productivity in the Baltics: Common Shocks, Different Implications\", January 17, 2025.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/01/17/competitiveness-and-productivity-in-the-baltics-common-shocks-different-implications-561082"
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    "Authors: Saioa Armendariz, Carlos de Resende, Alice Fan, Gianluigi Ferrucci, Bingjie Hu, Sadhna Naik, Can Ugur",
    "Published: January 17, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400299582.001",
    "Paper examines competitiveness and productivity in the Baltics, focusing on recent developments and asking why Russia’s war in Ukraine led to a prolonged recession and strong decline in competitiveness in Estonia, while Latvia and Lithuania shielded their economies more effectively.",
    "Authors: Saioa Armendariz, Carlos de Resende, Alice Fan, Gianluigi Ferrucci, Bingjie Hu, Sadhna Naik, Can Ugur.",
    "Date: January 17, 2025.",
    "Series: IMF Working Papers, Working Paper No. 2025/018, Issue: 018, Volume: 2025, Pages: 46.",
    "DOI: https://doi.org/10.5089/9798400299582.001",
    "Stock No: WPIEA2025018",
    "ISBN: 9798400299582",
    "ISSN: 1018-5941",
    "Documents a deterioration in export performance across the region.",
    "Constant share decomposition result:",
    "Multivariate filtering techniques and estimates of the real effective exchange rates based on historical productivity trends, consistent with Balassa-Samuelson, confirm that differences in long-term total factor productivity growth have affected external competitiveness.",
    "Comparative dynamics:",
    "A micro-econometric analysis reveals that resource misallocation, particularly in the services sector, has been a key driver of declining productivity in the region.",
    "Emphasis on allocative efficiency: resource misallocation is central to the decline in productivity across the Baltics.",
    "Findings underscore the need for targeted reforms to:",
    "Policy focus implied by results:",
    "Subject: Foreign exchange, Production, Productivity, Real effective exchange rates, Real exchange rates, Total factor productivity.",
    "Keywords: Baltics, Competitiveness, export share, Export shares, Global, Productivity, productivity in the Baltic, productivity trend, Real effective exchange rates, Real exchange rates, resource misallocation, TFP deceleration, TFP dynamics, Total factor productivity.",
    "**Working Paper**"
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