The paper examines the evolution of the institutional setup of Lithuania`s Currency Board Arrangement (CBA) and competitiveness from 1994 through 2001, with a view to determining the resilience of the Lithuanian CBA to external shocks in 2002-03. First, several indicators of competitiveness are...

In just over a decade after independence, the three Baltic countries, Estonia, Latvia, and Lithuania, have transformed themselves into fully functioning, small open-market economies that will be joining the European Union. Capital Markets and Financial Intermediation in The Baltics analyzes the...

This paper provides a new argument for quot;shockquot; versus quot;gradualismquot; in the implementation of trade policies. In the simple context of a small open economy with rational expectations, we consider the comparative welfare effects of eliminating an import tariff either immediately as...

Using a simple model, this paper shows how a strict monetary rule exhibits characteristics similar to those of an exchange rate anchor, in terms of a lack of robustness in the presence of adverse expectations (bad dreams). More specifically, as an anticipated devaluation under an exchange rate...

Using a simple model, this paper shows how a strict monetary rule exhibits characteristics similar to those of an exchange rate anchor, in terms of a lack of robustness in the presence of adverse expectations (“bad dreams”). More specifically, as an anticipated devaluation under an exchange...

This paper provides a new argument for “shock” versus “gradualism” in the implementation of trade policies. In the simple context of a small open economy with rational expectations, we consider the comparative welfare effects of eliminating an import tariff either immediately as an...