IMPACT OF MONETARY AND NON-MONETARY FACTORS ON ECONOMIC DEVELOPMENT OF THE BALTIC COUNTRIES
countries. Correlation analysis has been exploited to analyze the impact of both monetary and
non-monetary factors on gross domestic product dynamics of Estonia, Latvia and Lithuania.
The research results show that the most strong relationship in these three countries is observed
between GDP dynamics and the following variables: domestic credit provided by financial sector,
exports of goods and services including high-technology exports, official exchange rate,
household final consumption expenditure, unemployment and real interest rate. The findings of
the study indicate that inflation is related to GDP dynamics only in Latvia, foreign direct investments
are associated to GDP only in Estonia. Especial role in economic development of
these states belongs to export diversification. Companies diversified their product ranges switching
to high added value products. Development of new branches and new markets, especially in
Euro zone made sufficient impact on economic development of “Baltic Tigers”. Thus, both monetary
and non-monetary factors had impact on economic growth of these states.
Key words: gross domestic product, economic growth, linear regression, correlation, Baltic
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