Latvia And Its Impact On The Economy

Ukraine is granted a market economy status by the EU and USA. The sharp economic decline in the 90s resulted in deteriorating living standards for most citizens and widespread poverty. However, during the 21st century, there has been some positive economic growth in Ukraine, as well as Eastern Europe as a whole. Ukraine’s currency, the Hryvnia, was introduced in September 1996 and has remained relatively stable. The unstable political situation in Ukraine hardly influences its economic development. GDP has been growing steadily since 2005 at an average growth rate of 7% and industrial production has been expanding by 12%. The Ukrainian economy was hit by the harsh effects of the global financial crisis but managed to attain a 4.2%

The 2008 financial crisis and the recession that followed were the most severe the United States ever had. The 2008 financial crisis must be discuss as well as what the government did during the recession which led to the slow recovery. First, there are three major types of financial crisis: banking, debt and currency however there is no universal definition of a financial crisis. The 2008 financial crisis was a banking crisis, it actually started in 2007. Many experts on financial crisis have defined a banking crisis as “severe stress on the financial system, such as runs on financial institutions or large-scale government assistance to the financial sector” (Sanders 11). The reason for the 2008 financial crisis and the recession which followed started wat before experts realize there were issues in the financial sector. The government must intervene in a financial crisis to avert disruption of the

In Europe, the single currency created additional problems because of overvalued exchange rates, and high bond yields.” (Pettinger, 2013).

The Economic crash of 2008 had effects on nations around the globe. One of the nations that experienced the most difficulties was Iceland. In late September of 2008 the Iceland government had to purchase the nations 3rd largest bank from going bankrupt. “Iceland…was the first country to really suffer. Its three major banks collapsed in the same week in October 2008, and it became the first developed country to request assistance from the IMF in 30 years.” (Danielsson). The entire government almost suffered from

The average growth peaked during 2003-2008, but most countries have been strongly impacted by the 2008 financial crisis, which led to prolonged period of recession. In Central and Eastern European countries, prior to downturn, large, relatively cheap capital inflows entered the economy, creating credit, consumption and real estate booms. During crisis, problems such as declining export performance, sizeable external liabilities, highly leveraged firms and quickly expanding general government debt, were further exacerbated by low growth and poor adjustment capacity. Growth rebounded on the account of increased trade with the Euro Area, inflow of European Union funds, low commodity prices and higher consumption. At the same time, low commodity prices, slowdown in China, international sanctions for Russia and political instability led to output contraction in the former Soviet Union countries (World Bank, Global Economic Prospects,

In 2008, world economic downward has greatly impacted Iceland’s economic. The three biggest banks in Iceland were bankrupt because they were not able to pay the debts. As a result, Iceland banking system collapsed (Holmes & McArdle, 2008). Noted that, most world financial institutions decided to drop Iceland’s credibility. And loan from international market and investment were significantly dropping in Iceland’s financial market. It leaded Iceland’s kroner to become very unattractive. To regain and reconstruct Iceland’s financial system, using Canadian Dollar as its official currency is fundamental since Canadian Dollar is creditable and steady currency.

The focus of this paper is on post communist transition economies touched by the Euro Zone crisis. The negative influence it has made to economic dynamics was felt by everyone living in Central and Eastern Europe. Despite the actual collapse of some economies in Central and Eastern Europe, lower standards of living in parts of the region, protests and social anxiety, little attention was paid to the crisis and the recession in the post-communist countries that joined the European Union in 2004 and 2007. With their currencies, banking systems and economies on the verge of collapse of the Republic of the Baltic Sea, formerly known as "Baltic Tigers", were affected by the crisis in the form of the sharpest in the whole European Union. The deeper integration of these economies into the global market and full integration into the world economy (and the EU in particular) meant that these countries have become much more vulnerable to the crisis and recession. The foundations of the weakness were in the broad assimilation of neoliberal policies of the economies of Central and Eastern Europe, high dependence on investment and, in particular, in their specific exposure to the operation of international finance.

When the crisis began in the mid-2007 caused by sub-prime bubble, uncertainty among banks about the creditworthiness for their clients and customers deteriorated as they had majorly invested in very complex and overpriced financial products. As a result, the interbank market became volatile and risk premiums on interbank loans increased. Banks faced a serious liquidity problem, as they experienced major difficulties to revolve their short-term debt. At that stage, policymakers still perceived the crisis primarily as a liquidity problem. However, it was widely believed that the European economy would be largely safe to the financial turbulence. The real economy, though slowing, was thriving on strong fundamentals such as rapid export growth

We can see the evidence of financial crisis throughout time with the “credit crisis of 2007-2008” and the “Russian Crisis of 1998” and its global impact. Although Russia was experiencing economic growth in 1997 “…the country’s fixed exchange

Three historical examples of the Bretton Woods system in the 1970s, the successful attacks under the European Monetary System in 1992 and 1993 and the emerging market crises of 1994-2000 prove that the fragility of a peg exchange rate is more severe under an open capital market (Obstfeld and Rogoff, 1995).

To address the question as to how financially interlinked is Europe is to ask the extent to which what happens in one European country has a financial effect on another European country. Through this essay GDP will be used as the primary measure of the strength of an economy. Some may argue that this is not the sole measure: there are many other factors, which come into the strength of an economy such as unemployment, government spending and consumption. Furthermore the statistics surrounding GDP may themselves be inaccurate and hold distortions since it doesn’t take into account distribution of income and hidden economies such as the black market. However, it is easiest to look primarily at GDP and seek to examine the extent to which European economies’ GDP move in harness. This essay will also look at the reasons behind similarities and differences in individual European GDP movements and the efforts of European authorities to encourage Europe to be more financially interlinked.

It was in 2008 that the boom unraveled as the global economic crisis of over evaluation of U.S. properties, expanded into other countries around the world. Latvia however, started to experience trouble when Parex, the nation’s largest bank, exposed it was in finance

currency crisis can be defined as a speculative attack on a country’s currency that can result in a forced devaluation and possible debt default. One example of a currency crisis occurred in Russia in 1998 and led to the devaluation of the ruble and the default on public and private debt.1 Currency crises such as Russia’s are often thought to emerge from a variety of economic conditions, such as large deficits and low foreign reserves. They sometimes appear to be triggered by similar crises nearby, although the spillover from these contagious crises does not infect all neighboring economies—only those vulnerable to a crisis themselves.

In 2008 Latvia experienced a banking crisis that stemmed from a poorly regulated banking sector. The banking sector was using aggressive lending to grow the increased inflow of foreign capital, most of which came from Russia. This lead to a property bubble, similar to what was happening in the United States of America (US), prices were being bid up by borrowers who had access to cheap loans.

European Monetary System (EMU) is the arrangement by following which most EU (European Union) nations have connected their currencies to put a stop to great changeability and vacillations relative to one another. It was in 1979 that this system was organized in order to soothe and stabilize the foreign exchange and respond to price increases among member nations. However, sporadic changes not only elevated the values of strong currencies but at the same time, lowered the values of weaker currencies. In order to maintain the currencies within a constricted range, modifications in national interest rates were used in 1986. Later in the earlier phase of 1990s, the conflicting economic policies and conditions of its members sprained the EMU ("European Monetary System," 2009).