One Road, Two Ways: Integration of Estonia and Latvia to Economic and Monetary Union
One Road, Two Ways: Integration of Estonia and Latvia to Economic and Monetary Union

Summary/Abstract: The Baltic States are often considered a unitary region with few if any differences among them. After regaining independence 20 years ago, Estonia and Latvia pursued a similar monetary policy with the short-term aim of stabilizing the economy and a long term view of integrating the countries into western economic structures. Although the first mission was successfully completed, the second one became a bit more complicated. This paper aims to re-investigate the economic policies of Estonia and Latvia with regard to economic and monetary integration of the countries. We have tried to explain the role of politics in the decision-making process in the early 90s and the consequences these decisions have had. The secondary aim of this study is to explain the roles and interaction of monetary and fiscal policies on Estonian and Latvian accession to the EMU. We found institutional settings a key to developing a successful route for Estonia to the Euro Zone.

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