Summary of Boom, Bust, Recovery Forensics of the Latvia Crisis

Brookings Institution Press,

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Boom, Bust, Recovery Forensics of the Latvia Crisis summary
Is austerity the right way to return a failing economy to growth?


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In the wake of the Great Recession, economists, politicians and pundits have battled over how to address weak growth and declining prospects: by stimulus or austerity? IMF economists Olivier Blanchard, Mark Griffiths and Bertrand Gruss delve into Latvia’s recent economic history to understand austerity’s role in the nation’s return to growth. Their findings may not settle the argument once and for all, but getAbstract recommends this well-reasoned, well-researched investigation to readers on both sides of the economic debate.

In this summary, you will learn

  • How the Latvian economy swung from boom to bust and back to growth,
  • What role austerity policies played in these swings, and
  • Whether Latvia offers a model to other struggling economies.


Advocates of austerity cite Latvia as an example of the merits of making tough fiscal adjustments to rescue a faltering economy. Opponents say austerity hasn’t solved the Baltic state’s economic woes but has caused avoidable, long-term damage. As economist Paul Krugman noted, “The adulation over Latvia...
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About the Authors

Olivier Blanchard is director of research at the IMF, where Bertrand Gruss is an economist. Mark Griffiths is the IMF’s Latvia mission chief.

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