Monga, Celestin2013-06-212013-06-212004-05https://hdl.handle.net/10986/14111Latvia's experience over the past decade shows that economic growth and real convergence can no longer be assumed to be exogenously driven processes determined by given technological improvements and relatively higher factor returns. Instead, it is an endogenously driven process led by many variables, including policy variables. European Union membership clearly brings enormous economic benefits to Latvia. However, it also brings important challenges on the macroeconomic front, especially prior to the adoption of the euro. Substantial progress has been made toward fiscal consolidation since the mid-1990s but several risks remain. Given the facts that domestic demand remains buoyant and that Latvia will have to accommodate the expenditure commitments associated with NATO and EU membership while simultaneously aiming to fulfill the medium-term goal of a balanced budget, a more prudent fiscal policy should be the main short-term policy objective. The authorities should therefore reassess their current medium-term budget framework and strengthen their fiscal rules so that off-budget spending is eliminated and controls over spending ministries and local government finances are reinforced. They should also rethink any further tax reductions until a clear strategy is designed for compensating for projected losses in government revenues. Monetary policy can contribute to sustainable growth and job creation in Latvia in the medium and long term by providing an environment for price stability. It will have to be complemented by further microeconomic reforms and prudent wage developments aligned with productivity growth.en-USCC BY 3.0 IGOACCOUNTINGADMINISTRATIVE PROCEDURESAGGREGATE DEMANDAGRICULTUREAUDITSBALANCE OF PAYMENTSBALANCE SHEETBANK OF LATVIABANKING SECTORBANKING SYSTEMBUDGET DEFICITCAPITAL MARKETSCAPITAL PROJECTSCAPITAL REQUIREMENTCDCENTRAL BANKCOMMERCIAL BANKSCOMMUNISMCOMMUNISTCOMPETITIVENESSCONSOLIDATIONCONSUMER PRICE INDEXCORRUPTIONCPICROWDING OUTDEBTDEFICITSDEMOCRACYDEMOGRAPHIC TRANSITIONDEPOSITSDISTRIBUTION OF INCOMEECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC EXPANSIONECONOMIC GROWTHECONOMIC HISTORIANSEMPIRICAL RESEARCHEMPIRICAL STUDIESEXCHANGE RATEEXPENDITUREEXPENDITURESEXPORT GROWTHEXPORTSEXTERNAL SHOCKSFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIATIONFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL SYSTEMFISCALFISCAL ADJUSTMENTFISCAL BALANCEFISCAL DEFICITFISCAL DISCIPLINEFISCAL POLICYFISCAL RESTRAINTFISCAL RULESFISCAL SITUATIONFISCAL STANCEFIXED EXCHANGE RATEFOREIGN ASSETSFOREIGN BANKSFOREIGN BORROWINGFOREIGN DIRECT INVESTMENTFOREIGN INVESTMENTFOREIGN TRADEFORESTRYGDPGDP PER CAPITAGOVERNMENT DEBTGOVERNMENT OFFICIALSGOVERNMENT REVENUEGOVERNMENT REVENUESGROSS DOMESTIC PRODUCTGROWTH RATEGROWTH RATESHOUSINGIMPORTSINCOMEINCOME LEVELSINFLATIONINFLATION RATESINFORMAL SECTORINSTITUTIONAL CHANGEINSTITUTIONAL DEVELOPMENTINTEREST RATEINTEREST RATESINTERNATIONAL COMPETITIVENESSINTERNATIONAL INVESTMENT BANKLABOR FORCELABOR MARKETLABOR PRODUCTIVITYLAWSLEGAL REFORMLOCAL GOVERNMENTMACROECONOMIC PERFORMANCEMACROECONOMIC POLICIESMACROECONOMIC STABILIZATIONMACROECONOMICSMATURITIESMINISTRY OF FINANCEMONETARY POLICIESMONETARY POLICYNATIONAL CONSENSUSNATIONSOILOIL PRICESPENSION FUNDPOLICY DECISIONSPOLITICAL CONSENSUSPOLITICAL POWERPOLITICAL UNCERTAINTYPRICE INCREASESPRICE STABILITYPRIVATIZATIONPRIVATIZATION AGENCYPRODUCTIVITYPRODUCTIVITY GROWTHPRUDENTIAL REGULATIONSPUBLIC DEBTPUBLIC ENTERPRISESPUBLIC EXPENDITUREPUBLIC PROCUREMENTPUBLIC SECTORREAL EXCHANGE RATEREAL GDPREAL INTEREST RATESREAL SECTORREAL WAGEREFERENDUMREGULATORY FRAMEWORKSAVINGSSHORT-TERM DEBTSOCIAL SAFETYSOCIAL SAFETY NETSTATE ENTERPRISESTATE ENTERPRISESSUSTAINABLE GROWTHTAX ADMINISTRATIONTAX BURDENTAX POLICYTAX RATESTAX REFORMTAX REVENUESTAX SYSTEMTELECOMMUNICATIONSTERMS OF TRADETOTAL FACTOR PRODUCTIVITYTRADABLE GOODSTRADE BALANCETRADE DEFICITTRADE FLOWSTRADE REGIMETRANSITION ECONOMIESTRANSPARENCYUNEMPLOYMENTUNEMPLOYMENT RATEVALUATIONWORLD TRADE ORGANIZATIONWTO MACROECONOMICSECONOMIC MODELSTAX REDUCTIONSPRICE STABILIZATIONTRANSITION ECONOMIESPRODUCTIVITY GROWTHEUROPEAN UNIONNORTH ATLANTIC TREATY ORGANIZATIONWorld Bank10.1596/1813-9450-3307