The impact of euro establishment on macroeconomic indicators of Latvia and Estonia

Abstract

The aim of the article is to research the impact of the establishment of euro on macroeconomic indicators of Latvia and Estonia. The results of the research revealed that establishment of euro in Estonia have not had any significant impact on price increase (prices grew due to the trends of the global price increase), the inflation rate retained the tendency of decline and decreased by 0.86 per cent comparing the year 2011 and 2014. Percentage change of GDP during the same period made 0.77 per cent. The volumes of export decreased by 0.03 per cent while DFI increased by 2.45 per cent comparing the year 2011 and 2014. Reduction of export volumes is linked with the Russian embargo, which might also have had the impact on the negative percentage changes of GDP. Comparing the prognosticated inflation rate for the year 2014 and 2015 in Latvia, it has been found that inflation rate in the country should increase by 0.875 per cent, which is linked with the trend of price increase; Latvian GDP is prognosticated to decrease by 0.2 per cent, and DFI – to increase by 1 per cent. It can be concluded that establishment of euro has had the positive impact on DFI in Latvia and Estonia during the short evaluation term.