Publication

This paper examines the balance of payments deficits of the three Baltic countries and considers whether this situation should be a matter of concern. The authors reviews the recent literature on the sustainability of balance of payments deficits in a Baltic context. They conclude that these deficits pose a risk to their fixed exchange-rate policies until they adopt the Euro. In the long term, large deficits will influence the time path of convergence of living standards between the Baltic countries and the EU as a whole.