Fiscal Policy Learning from Crisis: Comparative Analysis of the Baltic Countries

The experience of a major crisis is often expected to lead to policy learning but the empirical evidence about this is limited. The goal of the paper is to explore comparatively whether the crisis of 2008–2010 has led to fiscal policy learning by civil servants in the three Baltic countries. Despite some differences in the crisis experience, the finance ministry officials in all three countries have identified the same lesson from the crisis: fiscal policy should be counter-cyclical and help to stabilize the economy. The paper also discusses how various factors have influenced policy learning, including the acknowledgment of failure, blame shifting, and analytical tractability.     

Cooperating Estonians and “exiting” Lithuanians: trust in times of crisis

This article argues that substantial differences in political legitimacy can help explain why Estonia dealt with the recent economic crisis more successfully than Lithuania. In 2009, when the crisis hit hardest, Lithuania saw its budget deficit expand substantially, while Estonia managed to keep the deficit under 3% of GDP and consequently was invited to join the Eurozone, to which it acceded in 2011. The experience of these countries presents an interesting puzzle, as the divergent fiscal performance cannot be attributed to purely economic factors. Both countries have a similar economic structure, and both were similarly affected by the crisis. Furthermore, both pursued similar expenditure and tax policies during the crisis. Based on quantitative and qualitative evidence, it is argued that higher tax compliance and subsequently higher tax revenues can explain the difference. In turn, this compliance gap can be attributed to different levels of trust in political institutions in Estonia and Lithuania.     

Searching for historical analogies in political economy: the Baltic states and the gold standard regime

This article compares the contemporary politico-economic regime in the Baltic countries with the classical gold standard regime, which successfully functioned in the Western world from 1870 until 1914. Both the classical gold standard system and the Baltic political economies were based on a hard currency peg policy supported by a high degree of economic flexibility. Politically, this flexibility was ensured by a strong insulation of economic policy-making due to a weak political left. Furthermore, the classical gold standard system and the Baltic regimes shared an ideational consensus supporting economic liberalism in general and hard currency peg policy in particular.     

Explaining national preferences on the new European banking policy framework: the case of Lithuania

Utilising the Lithuanian case, this article analyses what determines a country’s position on the transfer of national competency over banking policy to the EU level. In contrast to dominant explanations in scholarly literature, this article argues that Lithuania’s support for the banking union can be explained by the general pro-European orientation of the political system in the context of ambiguous aggregate economic costs and the benefits of the new institutional framework. In 2013, the EU Presidency also positively affected Lithuania’s stance. Finally, the decision about when to join the banking union was subordinated to the process of euro accession.