- Additional Authors
- Description
- 33 p.; 21 x 29.7cm.
- Summary
- From 2000 to 2007, Estonia was one of the fastest growing emerging market economies. A housing boom, fuelled by capital inflows and credit, resulted in skyrocketing house prices and an over-expanded construction sector. However, the currency board limited the Bank of Estonia's ability to curb credit growth, while the fiscal policy framework amplified the cycle through pro-cyclical spending increases and tax cuts. As credit was mostly financed by cross-border loans from foreign banks, the risks of disruptions to credit flows and financial contagion have increased. Some have already materialised through tightened lending standards and capital outflows. Estonia is now in a severe recession. To restore high and sustainable growth, the country will need to rebalance its resources from non-tradables towards exports. Regaining external competitiveness will be challenging, however, given the fixed exchange rate and recent devaluations in partner countries. Flexibility of the economy will thus be crucial. Over the medium term, policymakers could also strengthen incentives for a better functioning of the housing finance market and gradually remove the pro-cyclical bias of fiscal policy.
- Series Statement
- OECD Economics Department Working Papers, 1815-1973 ; no.700
- Uniform Title
- OECD Economics Department Working Papers, no.700.
- Subject
- LCCN
- 10.1787/224121736171
- OCLC
- oecd-lib-002813
- Author
Brixiova, Zuzana.
- Title
Capital Inflows, Household Debt and the Boom-bust Cycle in Estonia [electronic resource] / Zuzana Brixiova, Laura Vartia and Andreas Wörgötter
- Imprint
Paris : OECD Publishing, 2009.
- Series
OECD Economics Department Working Papers, 1815-1973 ; no.700
OECD Economics Department Working Papers, 1815-1973 ; no.700.
- Connect to:
- Indexed Term
Economics
Estonia
- Added Author
Vartia, Laura.
Wörgötter, Andreas.
- Other Standard Identifier
10.1787/224121736171 doi