Latvia's experience over the past decade shows that economic growth and real convergence can no longer be assumed to be exogenously driven processes determined by given technological improvements and relatively higher factor returns. Instead, it is an endogenously driven process led by many variables, including policy variables. European membership clearly brings enormous economic benefits to Latvia. However, it also brings important challenges on the macroeconomic front, especially prior to the adoption of the euro. Substantial progress has been made toward fiscal consolidation since the mid-1990s but several risks remain. Given the facts that domestic demand remains buoyant and that Latvia will have to accommodate the expenditure commitments associated with NATO and EU membership while simultaneously aiming to fulfill the medium-term goal of a balanced budget, a more prudent fiscal policy should be the main short-term policy objective. The authorities should therefore reassess their current medium-term budget framework and strengthen their fiscal rules so that off-budget spending is eliminated and controls over spending ministries and local government finances are reinforced. They should also rethink any further tax reductions until a clear strategy is designed for compensating for projected losses in government revenues. Monetary policy can contribute to sustainable growth and job creation in Latvia in the medium and long term by providing an environment for price stability. It will have to be complemented by further microeconomic reforms and prudent wage developments aligned with productivity growth. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - is part of a larger effort in the region to contribute to macroeconomic analysis in the Baltic countries.

The concept of fiscal impulse is defined, discussed, and differentiated from measures that attempt to summarize the macroeconomic effects of fiscal policy. Two methodologies are briefly discussed and their corresponding measures presented for the G-7 countries over the ten-year period ending in 1989. Controversies about the measure are highlighted and potential improvements are also discussed.

Latvia has undergone major economic and social change since the early 1990s. Despite an exceptionally deep recession following the global financial crisis, impressive economic growth over the past two decades has narrowed income and productivity gaps relative to comparator countries in the OECD.

Estonia’s economy continues to perform well, and growing incomes support well-being. However, the expansion has peaked, and growth is set to soften due to weak international demand. Prudent fiscal policy has resulted in low debt, but spending pressures related to meeting infrastructure needs and ageing are mounting. Old age poverty is high and the proposal to allow early withdrawal of pension funds threatens macroeconomic stability and pension adequacy. The gender wage gap is among the highest in the OECD, and inequalities in income and health are considerable, reflecting gaps in the social safety net. The oil-shale sector is highly energy-intensive and is the main culprit behind Estonia’s high greenhouse gas emissions, but reducing dependence on the sector is challenging, as it is an important employer and meets 70% of Estonia’s energy needs.

"Revenue administration is a major interface between the state and its citizens. A good revenue administration is, therefore, an important attribute of good government. As a result, in recent years, policy makers have become increasingly aware of the importance of policies that will promote business development while ensuring voluntary tax compliance. In the modern context, it is neither desirable nor feasible to examine or inspect every single taxpayer. The revenue administration, therefore, has to rely on effective management of compliance. Promoting voluntary compliance, achieved through a self-assessment system in which taxpayers comply with their tax obligations without intervention from tax officials, requires developing modern approaches to audits based on risk management. The impact of audits critically depends on a properly designed audit selection strategy focused on high-risk taxpayers to provide the most cost-effective outcome. This, in itself, contributes to promoting voluntary compliance. Risk-based country audits: approaches and country experiences are an important study of this critical revenue function of compliance management."--Publisher's website.

Presenting a sweeping analysis of the legal foundations, institutions, and substantive legal issues in EU monetary integration, The EU Law of Economic and Monetary Union serves as an authoritative reference on the legal framework of European economic and monetary union. The book opens by setting out the broader contexts for the European project - historical, economic, political, and regarding the international framework. It goes on to examine the constitutional architecture of EMU; the main institutions and their legal powers; the core legal provisions of monetary and economic union; and the relationship of EMU with EU financial market and banking regulation. The concluding section analyses the current EMU crisis and the main avenues of future reform.

The euro area (EA) bank resolution and crisis management arrangements have been strengthened considerably over recent years, but work remains to complete and unify the regime. The adoption of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), and the establishment of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) provide a foundation to deal with problem banks. The authorities remain committed to completing the banking union through the establishment of a backstop for the Single Resolution Fund (SRF) and a European deposit insurance scheme (EDIS) and other measures, many of which are in line with recommendations in this report.