ABSTRACT
This chapter analyses the determinants and outcomes of the Baltic states’ accession to the Eurozone. It analyses why Estonia, Latvia and Lithuania established distinctive macroeconomic policy regimes based on fixed exchange rates in the 1990s and how these institutions and policy choices shaped the process of integration with the Eurozone. It shows how their distinctive approach to macroeconomic policy facilitated adoption of the euro in many respects, but that it also created some challenges in the aftermath of accession to the European Union, which made the process more complicated than previously expected. It analyses the impact of the global financial crisis on the three Baltic States and how their adoption of internal devaluation related to the process of euro adoption. The chapter also reflects on the performance and prospects of the Baltic economies within the Eurozone and lessons from their experience for understanding adjustment to economic crises within the common currency area.
