External Macroeconomic Shocks and the Estonian economy: How did the Russian Financial Crisis affect Estonian Unemployment and Foreign Trade?
External Macroeconomic Shocks and the Estonian economy: How did the Russian Financial Crisis affect Estonian Unemployment and Foreign Trade?

Summary/Abstract: In this empirical paper we examine how the Russian financial crisis affected Estonian unemployment and foreign trade. In our interpretation the Russian crisis caused depression in the Estonian economy, but at the same time it also caused a relatively fast reallocation of trade. Eastward export flows (largely foodstuffs) declined drastically while exports to Finland and Sweden largely increased. Several manufacturing firms went into bankruptcy and foreign investors benefited from relatively low stock prices and bought majorities in many Estonian firms. Although the main FDI inflow was connected with the banking sector, we can say that the banking sector was in crisis because of the poor performance of manufacturing (and other sectors).

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