Development of System Dynamic Model of Latvia’s Economic Integration in the EU

Joining the European Union big opportunities in the international markets have opened for Latvia. Paper purpose is to investigate influence of international integration processes on development of economy of Latvia. Latvia's incoming in EU increased the amount of received means from structural and cohesion funds, removed the trading barriers, increases foreign investments, reduced unemployment and increased labor migration. In the paper the system dynamics model, which describes integration of the Latvian economy into EU, is developed. In the model international financial flows connected with Latvia and EU; import, its relation to internal producing; and migration processes are considered. Model functioning is measured considering various scenarios of situation development. The developed model can be used not only in the analysis of Latvia’s economic integration in the EU, but on its basis it is possible to create models of regional cohesion in Europe.