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Economic Turmoil In Latvia Case Study

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Running Head: CASE STUDY: ECONOMIC TURMOIL IN LATVIA

Case study: Economic Turmoil in Latvia
[Name of the Writer]
[Name of the Institute] Case Study: Economic Turmoil in Latvia

This case highlights how the economic fortune of Latvia has transformed since 2004. It was the time when the country was busy in enjoying their economic boom and development, but various critics become worried that the Latvian economy was going towards overheat. At the year 2008, financial institutions started to face trouble, and at the end at least one major organisation was nationalised (Joel, 2009). In the end, Latvia economic struggle pushed them into accepting the assistance provided by IMF. Below discussion revolves around the following questions related to the case:

1. What kind of crisis was Latvia experiencing in 2008, a currency crisis, banking crisis, or debt crisis?
In 2008, Latvia was challenged with deep recession, when the economy was expected to contract by more than 15% …show more content…

As the decision for maintaining the strong and peg currency for the hope of accelerating investment from losing their value and also to permit agreement to common currency as quickly as possible, the plan had favoured the economy, but inflation rate kept Latvia out before the occurrence of 2008 crisis, as for now the optimistic target might play major and risky decision that is expected to from Latvian government to be taken. This requires difficult and painful internal devaluation of budget cuts with the increase in tax, while popular and economic pressure could break the peg. It is not a much surprise that the government was not willing to accept the changing nature of the boom and they were not ready to slow down intensely, therefore after the crisis of 2008, if Government have acted immediately while slowing down their economic pace and regulating credit growth, might have led to change the

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