Boom and bust in the Baltic States

This paper investigates the recent economic evolutions in the Baltic States. After the Global Financial Crisis the States of Estonia, Latvia and Lithuania are facing high unemployment rates and only moderate growth perspectives. It is argued, that economic policy has restricted taking into account the constraints of small states. The recent economic strategy of internal devaluation is reviewed from a macroeconomic perspective. The main finding of this paper is that the chosen strategy is likely not helping to reduce unemployment in a short-term, but can be supportive for future growth perspectives via the enhancement of a transformation process into an innovation-driven economy