Although I don't usually mention Latvia along with the four large bubble markets of the UK the US, Spain and Ireland, Latvia went through a housing bubble and bust that was just as severe. The policy response in Latvia was austerity. But because Latvia, like Ireland has re-emerged from economic contraction, a debate has now developed whether the country is an example of the success of austerity or further proof of its failure.
What is now clear to policymakers is that austerity in a post-crisis environment has a severely negative impact on private demand and growth. In the euro zone in particular, many economists were surprised at how much economies in the periphery contracted due to economic austerity in the form of spending cuts and tax hikes. Readers of this site were not surprised as ...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.