The Speed and Sequencing of Market Reforms:

The Case of Banking in Latvia

I. Introduction

In 1991 Latvia withdrew from the Soviet Union and gained its independence as a sovereign state. It quickly embarked on the transition path to a market economy and, especially in the banking sector, initiated "free market" reforms. From 1991 to 1993 the Latvian banking sector moved from centralized state banking to a market with 61 independent banks. In 1994 and early 1995 a crisis emerged in the Latvian banking sector as 11 banks failed including the largest bank (Bank Baltija) which held 23% of all deposits. There is no deposit insurance in Latvia, and the failure of some banks to honor their obligations to depositors has generated considerable political pressures on the Latvian government to take a more active regulatory stance. To date there have been several legislative proposals to restructure banking in Latvia. These legislative efforts have included proposals for compensating depositors who have lost deposits in failed banks, increasing capital requirements for banks, initiating deposit insurance, and the imposition of limitations on open foreign currency positions.

The difficult experience with market reforms in banking is not limited to Latvia. In the Fall of 1995, the two largest banks in Lithuania failed. Together these two banks accounted for 25% of all deposits in Lithuania. Since 1991 24 private Estonian banks have been closed or had their operations suspended (Economist, 1/20/96, p. 79). Reports of similar crises in banking are coming in from other republics of the former Soviet Union. The future path of market reforms depends critically on the political response to these banking crises.

II. Background on Latvia's Market Reforms

With respect to the market reforms in the financial sector, there seems to be little doubt about the need to fashion reforms so that the financial sector "serves industry and trade, not the other way around" (Akyuz, p.37). However, when searching for Western models for ways to do this, there exists no single model. Considerable variation exists in the way financial markets are organized in successful Western economies. A newly formed country like Latvia, in its search for a model to imitate, can look to the "administered, state led" financial system of Japan, the American "capital market, company led" system, or the German 'negotiated, bank led" system (see Zysman, chapter 6). Thus the description "Latvia initiated market reforms in banking" is an oversimplification. One observer suggested that in the case of Latvian banking "structural reform has been rapid and a laissez faire approach has been applied."

The financial market reforms adopted by Latvia relied more on free market processes than most other countries. For example, compared to the countries analyzed in the World Bank publication "Financial Reform Lessons", Latvia, more than other countries, has initiated 'big bang" reforms in banking, where "big bang" reforms include interest rate deregulation, privatization of banks, low reserve requirements, the lifting of capital controls, and the granting of "universal" banking powers to financial institutions (see Capio et. al Table 1).

Especially in banking, the Latvian government implemented market reforms quickly and with a minimum of government regulation. Government created entry barriers (e.g. initial capital requirements) were low and by 1993 61 independent banks were operating in the Latvian market. Foreign banks were free to operate within Latvia, although by 1995, no foreign banks had exercised this option. Interest rates and exchange rates were market determined from the beginning, and there were no restrictions on international currency flows. Critically, given the events that have transpired, there was no government provided deposit insurance. Given the rapid opening of the Latvian financial markets some observers saw Latvia as positioning itself to become Russia's Hong Kong (Financial Times, 6/6/95, p.2).

An essential ingredient of the reform package was to create a credible monetary system with a stable currency and low inflation. Figure 1 presents official inflation statistics for Latvia. Inflation dropped from 50% per month to 3% per month as Latvia separated itself from the Russian rouble. Latvia completed the introduction of its own currency (the lat) during 1993. Following its introduction, the lat has steadily appreciated against the dollar (see Figure 2). This appreciation is partly a result of the Bank of Latvia's unofficial target of pegging the lat to the SDR with the target rate of 1 SDR = .80 lat. The lat smoothly appreciated until this target was met in early 1994. The remaining variation of the lat against the dollar is due to the dollar's variation against the SDR. (Saavalainen, p. 3)

The Bank of Latvia has pursued its goals with considerable independence from other branches of the Latvian government. As yet the central bank has not deviated from its goal of maintaining a stable currency despite Latvia's recent experience with high real interest rates, negative economic growth, and increased imports as foreign responded to the appreciation of the lat. While confronted by strong opposition from legislators, control of the central bank has remained in the hands of central bank president Einars Repse since 1991.

As a final introductory note, Latvian financial markets are heavily influenced by events in Russia. The instability of the Russian rouble, high rates of Russian inflation, economic uncertainty, and restrictions on private banking in Russia have all contributed to flows of financial capital out of Russia and into the Latvian financial sector. In addition, the lat emerged as a stable currency and Latvian banks offered high interest rates for deposits. During the early 1990s Latvia was perceived as a safe haven for Russian financial capital and the Latvian banking system provided valuable services in facilitating trade with Europe that took advantage of non market pricing policies within Russia. The large flow of foreign currency into Latvia resulted in excess reserves of foreign currency and induced the Bank of Latvia to buy foreign currency in its efforts to maintain its pegged exchange rate policy.

III. The Origins of the Banking Crisis in Latvia

Starting in 1991 the Latvian government implemented market reforms in the banking industry. While three state-owned banks continued to operate, the market soon became dominated by private banks. (The three "state owned" banks are only partially owned by the government and are in the process of being privatized.) Figure 3 shows the initial rapid increase in the number of banks operating in Latvia. By 1993, more than 60 independent banks were operating in the Latvian market, but by 1995 the number of banks had begun to fall due to bank failures. These figures do not reflect the fact that in 1996, in the wake of the banking crisis, the Bank of Latvia only allowed 11 banks to take deposits from individual Latvians. It could be argued that only the top twenty banks had a reasonable prospect of surviving, and the analysis concentrates on these larger banks. The top twenty banks held approximately 90% of all deposits. In particular the analysis must consider the influential role played by Bank Baltija which was the largest bank, and it gained market share between 1993 and 1995. In early 1995 Bank Baltija held about 23% of all deposits and 40% of Latvian depositors held their deposits in Baltija. In May of 1995 Baltija was declared insolvent, and it is unlikely that the Latvian government will furnish any funds to repay depositors.

Table 1 shows the interest rates for 1 year deposits at selected Latvian banks in October, 1993. Currency was freely convertible so depositors had their choice of making deposits in lats or dollars. Three points stand out as unusual for Western observers. First, there existed considerable between-bank variance in interest rates. In a market with a large number of firms it is normally expected that competition will force prices to be about the same. Secondly, the difference between interest rates on lat and dollar accounts is paradoxical given that the lat appreciated against the dollar by more that 10% during the year 10/93 - 10/94. In a market where appreciation of the lat was anticipated, interest rates on dollar accounts would be higher than on lat accounts. Thirdly, the real rate of interest was abnormally high. While expected rates of inflation for Latvia may have been high in 1993, expost Latvian annual inflation was 25% - 30% during this period. (Bank of Latvia Annual Reports, 1994 and 1995.) The rates on dollar deposits were also considerably higher that those offered in world markets at that time. Each of these puzzles will be considered to determine what strategies generated these interest rates.

First, however refer to Figures 4a, 4b, and 4c which display time series data for these banks. From these time series it is clear that all three market paradoxes were on the way to being resolved after 18 months. (Saavalainen, p. 16, presents data that are broadly consistent with the data presented here.) Interest rates on lat deposits fell dramatically until they stood at about 20% in April 1995 (see Figure 4a). Interest rates on dollar deposits also fell and by April 1995 were also about 20% per year (see Figure 4b). Figure 4c shows that the difference between interest rates on lat and dollar deposits also fell until April 1995 when the difference was about 0%. The variation in interest rates offered by different banks also was approaching zero by April 1995. Thus it can be argued that starting from the disequilibria which seemed to exist in October 1993 it took about 18 months for equilibria to emerge. The analysis now turns to an examination of the conditions underlying the initial disequilibria.

1. Cross Sectional Interest Rate Variation. Referring again to Table 1, it is difficult to understand how a bank like Parex, offering 12% annual interest could attract depositors when Baltija is offering 90% annual interest on lat accounts. Yet, both Baltija and Parex gained in market share of deposits during 1994. One explanation is that the differences reflected different perceptions of the risk of bank default. According to this explanation Baltija was perceived to be more likely to default, and Baltija's high interest rates represented a risk premium. One shortcoming of this explanation is that if Baltija was perceived to have higher default risk, then the risk premium would be reflected in higher interest rates for both lat and dollar deposits. Yet the interest rate offered for dollar deposits at Baltija was below average.

The risk premium explanation suffers from other shortcomings. The risk of default on deposits is the perceived probability that the bank will become insolvent times the probability that the government will not bail out the bank if it does become insolvent. A popular perception was that Baltija was "too big to fail", reflecting the notion that it would not be politically sustainable for legislators to allow Baltija to fail as 40% of Latvian depositors held deposits in Baltija. Also damaging to the risk premium explanation is that according to statistics published in Latvia's leading newspaper (Diena, November 22, 1993, p. 10.), Bank Baltija had a higher ratio of "own capital" to deposits than Parex Bank in September 1993. An opinion poll published by Diena (July 24, 1995, p. 4) posed the question "which bank do you trust the most?" According to this poll Bank Baltija was mentioned by 35% of the respondents. Second on the list was Krajbanka (a state bank) which was mentioned by only 25% of respondents. Thus Baltija was not perceived by the general public to be a risky bank. Furthermore, if risk of bank default is used to explain differences in interest rates between banks, then it must be argued that this risk difference decreased over time as the interest rates converged to 20% by the Spring of 1995, just as Baltija was about to fail.

Interviews conducted with Latvian banking officials revealed the following two explanations of the between-bank variation in interest rates which existed in October 1993. First, it was noted that the banking market was segmented and banks offered differentiated products. Thus Parex was able to expand its market share of deposits despite its low interest rates because it concentrated on servicing clients in Russia and Kazakstan. Deutch-Lettish Bank successfully competed by catering only to large commercial depositors who demanded service in foreign exchange transactions. Other banks specialized in serving clients in the agricultural sector, the oil sector, or in specific regional markets. Baltija targeted small depositors. As one observer noted, "Baltija was successful in getting all the lats out of the socks and mattresses of the small depositors." While there is some truth to this explanation, it cannot explain the degree to which interest rates varied between banks (i.e. 12% at Pareks versus 90% at Baltija). Also this explanation is not capable of explaining why the between-bank variation in interest rates approached zero by 1995. It would have to be argued that banks offered differentiated products in 1993 and that by 1995 this differentiation had largely vanished. Interviews conducted with Latvian banking officials revealed that in 1996 banks are increasingly turning their attention to competing against each other for local business. This, in part, has been a response to the exit of banks like Baltija. Some variation in interest rates persist. In May, 1996 Pareks Bank offered 10% for one year deposits in lats while Deutch-Lettish offered 18%. The between-bank variation observed in 1993 has fallen dramatically and may now represent what would be expected given the degree of differentiation which exists in this market.

Another explanation offered for the variation in interbank interest rates concerns expectations on the future value of the lat. All banking officials interviewed mentioned that the high interest rates offered by Baltija and some other banks were driven by their expectation that the lat would depreciate significantly over the next year, much like the Russian rouble. In October, 1993 the lat had just been introduced as the national currency, and expectations concerning the future value of the lat varied. The future value of the lat depended on the future path of market forces as well as the future actions of the central bank in currency markets. In both cases there existed little history from which to extrapolate.

This begs the question, 'why would banks differ so much in their expectations concerning the future value of the lat ?' The answer to the question could arise from differences between banks in information sets or differences in the models they used to make forecasts. If we argue that all banks had access to the same information, then the differences in forecasts arose because the different banks used different models in generating forecasts from the same information. An important component of such a forecasting model would be a model of central bank behavior in currency markets. Given the recent formation of the modern Latvian government it is reasonable to argue that there was no well accepted model of the political constraints operating on the central bank in pursuing its stated objective of maintaining a stable currency.

2. Large Differences in Interest Rates for Lat and Dollar Deposits. As noted above, it was widely observed in the Latvian banking community that Baltija and other banks held expectations that the lat would depreciate (against the dollar) considerably after its introduction in 1993. The strategy followed by Baltija was to expand aggressively its one-year lat deposits by offering 90% annual interest. Baltija did not actively seek dollar deposits. Its interest rate for one year dollar deposits was 18% which was lower than the average. By converting the lat deposits into dollars, Baltija was speculating that the lat would depreciate during 1994 and it would earn foreign exchange profits sufficient to cover the cost of funds. According to one calculation, if the lat depreciated by more than 60% during a year, Baltija would have been able to pay 90% interest on its lat accounts and still earn a profit. In light of the experience of the Russian rouble during this period, an expected depreciation of the lat of 60% may not have been an unreasonable assumption.

At the same time, potential depositors held varying expectations concerning the rate at which the lat would depreciate. In order to attract deposits banks needed to offer interest rates on lat deposits greater than the rate at which depositors expected the lat to depreciate. (The author lived in Latvia in 1993/94 and did not make any lat deposits at Baltija because he expected the lat to depreciate at a rate comparable to the depreciation of the Russian rouble.) Thus deposits came from that portion of potential depositors holding expectations of relatively low rates of lat depreciation and went to banks holding expectations of relatively high rates of lat depreciation. The net effect (see Figure 5) was that total deposits from enterprises and individuals (excluding interbank deposits) rose 64% over the period 10/93 to 1/95. (Calculated from Appendix 1 of the Bank of Latvia Annual Reports for 1994 and 1995.)

From Baltija's 1993 Annual Report prepared by the British accounting firm Coopers & Lybrand (published in August 1994), Baltija had a 1.5 million lat foreign exchange loss during 1993 against a profit of 55,000 lats. (Bank Baltija Annual Report 1993, p. 41.) As an addendum to the 1993 balance sheet Coopers & Lybrand noted that Baltija suffered large foreign exchange losses in 1994 and had not hedged their open position in US dollars. (Bank Baltija Annual Report 1993, p. 56.)

This seems to be a compelling explanation for why the interest rate Baltija offered on lat deposits was considerably higher than that offered on dollar deposits in the Fall of 1993. With the introduction of a new currency, there existed large variations in expectations concerning the future value of the lat. Banks like Baltija offered an interest rate premium on lat deposits under the expectation that the lat would depreciate. Banks like Parex and Deutch-Lettish offered no interest rate premium under the expectation that the central bank would carry through on its promise to maintain the value of the lat. An interview with officials at Deutch-Lettish Bank lends support to this hypothesis. In October, 1993 Deutch-Lettish reduced their interest rate on lat deposits from 60% to 35% which is the same interest rate offered on their dollar deposits. When asked to list the reasons for this reduction, the response was that the analysts at Deutch-Lettish had, in September, 1993 completed an analysis which concluded that the lat would be stable against the dollar over the next year. As time passed and the central bank gained more widespread credibility for maintaining the lat's value, expectations adjusted, and the interest rate differential largely disappeared by the Spring of 1995.

3. High Real Interest Rates: If one were to analyze the connection between central bank monetary policy and interest rates, there would be a very weak, (and even positive), contemporaneous relationship between money supply growth rates and changes in interest rates during the period 10/93 - 4/95. Interest rates dropped considerably and money supply growth rates did not increase during this period.

If one thinks of banks as having a derived demand for deposits then the high interest rates observed in 10/93 would be derived from the banks' high expectation of the profitability of using deposits in either loan or speculative activities. In October, 1993 the interest rates on loans in Latvia were well in excess of 10% per month while by the Spring of 1995, interest rates on loans were averaging about 5% per month. (Saavalainen, p. 16)

There exists a paradox in these data. First, it was claimed that the high interest rates existing in 1993 were derived from a strong demand for loans. However, at this time banks were holding reserves of about 25% when the required reserve ration was only 8%.(Bank of Latvia 1994 Annual Report) With interest rates so high, why were banks holding considerable excess reserves? Second, during 1994 the rate of growth in the money supply did not increase, interest rates fell, and the total amount of loans given increased. Falling interest rates with an increase in the total amount of loans suggests that the supply curve of loanable funds increased during this period. What generated this increase in supply? It is interesting to note that the drop in interest rates coincided with the fall in the average bank reserve ratio and conclude that the high interest rates existing in 1993 generated an excess supply of loanable funds and the market responded to this excess supply as we would expect.

4. A Tentative Model: When asked about the about the three puzzles discussed above, officials in the Latvian banking community unanimously responded, "well, you know in 1993 we were not really operating according to market principles." However, the evolution of the Latvian banking market does seem broadly consistent with our models of price competition. Consider three structural features of this market. First, in 1993 there existed widely varying expectations of the rate at which the lat would depreciate. Second, banks offered differentiated products. And third, banks engaged in price competition for deposits. Consider a Bertrand model with a differentiated product. In this model banks' reactions to the interest rates offered by other banks would depend upon the degree to which they offered a differentiated product and upon their expectation of future lat depreciation. Banks offering a more differentiated product and holding expectations of a relatively low rate of lat depreciation would offer lower interest rates on deposits. This may fit the case of banks like Pareks and Deutch-Lettish. Pareks, which offered special services to CIS customers maintained a low interest throughout the period and was still able to gain market share. A market where banks offer differentiated products, hold different expectations of the future exchange rate and behave as Bertrand price competitors is capable of generating between-bank interest rate variability of the sort presented in Table 1.

As time passed expectations were updated to account for the apparent strong backbone and secure political position of the Bank of Latvia and the stability of the lat. In addition (according to interviews with bank officials) banks moved into each others markets. Given these structural changes, the Bertrand model described above would predict that interest rates would decline and the variation in interest rates offered by different banks would also decline. In general this result is consistent with the data.

Through 1994 and the Spring of 1995, some banks (e.g. Baltija) were faced with a dilemma; assets were held in dollars while liabilities (e.g. deposits) were in lats, and the lat was continuing to appreciate against the dollar. They had attracted one-year deposits at high interest rates and interest rates were falling so that interest income fell below their cost of capital. Banks faced with this dilemma became insolvent by the beginning of 1995. Banks like Parex and Deutch-Lettish offered lower interest rates in the beginning, did not speculate against the lat, and they have survived the crisis.

IV. Policy Issues

The events that transpired in the Latvian banking market provide some insights for the debate surrounding the proper speed and sequencing of reforms during the transition from a planned to a market economy. In interviews with Bank of Latvia staff and members of the banking community, the following question was posed. "In hindsight, should the market reforms have been conducted differently?" (Interviews were conducted during June, 1996.) The following policy issues were commonly mentioned.

1. The timing of privatization in banking: The question arises whether privatization of banking should occur at the beginning of the reforms, or should it be delayed until other sectors of the economy have stabilized ? In an official policy paper from the Bank of Latvia it was noted "The first reason underlying the banking crisis in Latvia is that the banking system developed much ahead of the overall economic environment." ("The Banking Crisis in Latvia: A Year Afterward", p. 1.) For example, the banking crisis may not have been as severe if the introduction of private banking would have been delayed until after central bank credibility had been established and incorporated into expectations. In the case of exchange rate expectations, the evidence reported in this paper suggests that it took about 18 months after the introduction of the lat for expectations to adapt to reflect the stability of the lat. In terms of reform sequencing it could be argued that first the monetary authority must be successful in reducing inflation and stabilizing the currency and, one year later, private banks would be licensed to operate. The cost of this sequencing is that the rapid entry of banks into the Latvian market did produce some responsible, effective, and progressive banks from the beginning. Delayed entry of these types of banks imposes significant costs on the economy.

2. The restrictiveness of licensing requirements: Suppose the equilibrium number of banks was 10. Should bank licensing requirements specify high levels of initial capital so that rates of entry are slow and that the market gradually approaches 10 banks from below? Or should, as in the Latvian case, licensing requirements be low so that there is rapid initial entry and subsequent exit according to market selection criteria until the market approaches 10 banks from above? The low entry barrier approach runs the risk that some banks that enter the market will fail. In the Latvian case it should have been obvious that the market would not sustain 60 independent banks, and that a significant risk of bank failure existed. According to the Bank of Latvia policy paper on the banking crisis the failure of banks "eroded confidence in the banking system. Many households and enterprises withdrew their deposits. Concurrently the lending by banks decreased as well, and the interbank market narrowed notably." ("The Banking Crisis in Latvia: A Year Afterward", p. 1.) However the strategy of erecting high entry barriers as a filter to screen out banks with no real prospect of surviving has its costs as well. Filtering will be imperfect. In the Latvian case three of the largest banks failed and some of the smaller banks have grown and become successful players in the market.

3. Regulation of bank operations: The Bank of Latvia has identified areas where regulation may be desirable during the early stages of the transition. Important among these are tighter restrictions on insider lending. The Bank suggested that there existed "a certain pressure on behalf of shareholders that resulted in risky insider or connected lending." ("The Banking Crisis in Latvia: A Year Afterward", p. 1.) Also noted was a new regulation where the Bank of Latvia assigns a risk classification for each bank's loan portfolio, and each bank then is required to set aside a specified provision for 'doubtful loans'. Also on the Bank's list is a tighter restriction on open foreign exchange positions. While regulations like these may generate a more orderly development of the banking market, this approach assumes that enforcement mechanisms are in place and immune from manipulation. Despite the relatively low level of regulation which existed in the Latvian banking market, existing regulations were routinely violated through the falsification of records and money laundering schemes. There is some sentiment that the reform did not need more regulations, but simply needed better enforcement of the regulations that existed.

4. Deposit insurance: This is an issue that has been given a great deal of thought in the Latvian financial community. All interviews generated the same response to the issue of deposit insurance. If the reform package takes the approach of (1) early bank privatization, (2) low entry requirements, and (3) imperfectly enforced regulations, then deposit insurance should not be included in the early reform package. As this paper has reported in the Latvian case, rapid early entry produced over 60 banks which followed distinctly different strategies. There existed large and small banks which adopted prudent, conservative polices emphasizing servicing commercial clients with the long term goal of building a reputation for high quality. At the same time some banks (again both large and small) adopted risky and sometimes criminal strategies where goals were centered around short term gains. For example, one bank offered high interest rates, attracted depositors and then the owners transferred the money and vanished. The adoption of deposit insurance at the early stages of reform could not possibly adjust premiums according to an experience rating since there existed no history of past performance. Thus banks would be pooled together regardless of the riskiness of the strategies they adopted. The attendant moral hazard problems would have penalized banks which adopted less risky strategies and the overall riskiness of the market would increase. There was an early discussion of private provision of deposit insurance by a small group of banks who judged themselves to be among the group of banks following prudent strategies. Due to public choice problems the plan was never implemented. However, now that the banking crisis has occurred the remaining members of the banking community are concerned with the perceived riskiness of the Latvian banks and the flight of deposits out of the market. Now that the riskier banks have been culled by the market the remaining banks are less concerned that deposit insurance would place them in the same pool with risky banks. There is a more widespread agreement that deposit insurance should now be implemented as a means to instill more confidence in the market. The main point here concerns the sequencing of reforms, and that deposit insurance is a policy which should be considered later in the transition rather than at the beginning.

While, in hindsight, there is some reason to argue that the Latvian reform policy should have implemented policies which would have reduced the extent of the banking crisis, there is ample evidence to support the idea that market reform in banking has worked remarkably well in Latvia. While conditions in the Fall of 1993 were inconsistent with the usual notions of a market equilibrium, within less than 18 months equilibria were quickly approached. The failure of banks is a normal and cleansing process wherein banks following inefficient policies are purged from the market. Banks like Baltija that operated to borrow money from depositors to speculate in foreign currency have been forced out, while banks like Deutch-Lettish who earn most of their income by providing services are prospering. The rapid entry of more than 60 banks provided a large sample from which the market is operating quickly to select those that adopt effective strategies. The "banking crisis" has created a demand for companion institutions which are rapidly being supplied. Western auditing firms are now actively supplying services in the Latvian market, and Latvian banks have formed correspondent positions with many European banks to facilitate risk management. Perhaps the most crucial elements contributing to the successes of this particular reform experience are that the Bank of Latvia maintained their stabilization policies until creditability was established, and the Latvian representative democracy did not react to the banking crisis by demanding a return to the past..

References

Akyuz, Yilmaz, "Financial Liberalization: The Key Issues" UNCTAD Discussion Paper, No. 36, March, 1991.

The Bank of Latvia, "Banking Crisis in Latvia: A Year Afterward" May, 1996.

Caprio, Gerard, Izak Atiyas, and James Hanson, "Financial Reform Lessons and Strategies" The World Bank Working Papers, No 1107, February, 1993.

The Economist, "Dodgy Banks: How to Go Bust in the Baltics," January 20, 1996, 79.

The Economist Intelligence Unit, "Country Report, Baltic Republics," 3rd Quarter, 1994.

Financial Times, "Latvian Zurich Turns into Banking Las Vegas," June 6, 1995, 2.

Jaffee, Dwight and Mark Levonian, "Russian Banking", Federal Reserve Bank of San Francisco Weekly Letter, October 20, 1995.

Saavalainen, Tapio, "Stabilization in the Baltic Countries: Early Experience" in Roadmaps of the Transition, International Monetary Fund, Washington, September, 1995, 1-23.

Vanags, A. and Garry, J., "Inflation, Exchange Rates and Central-Bank Policy in a Transition Economy: An Analysis of the Latvian Experience, 1992-1994", University of London Working Paper #333, February 1995.

Zysman, John, Governments, Market, and Growth: Financial Systems and the Politics of Industrial Change, Cornell University Press, Ithaca, 1983.

Endnotes