Baltic Countries'' currency relations development before the introduction into Eurozone
The purpose of this article is to make historical digression of the currency exchange rates in Baltic countries. The Baltic States started their programs of sustainability of national currencies in 1992. The choice of the exchange rate mode became a problem for the economists: to accept the floating exchange rate or to operate the fixed rate. Though the programs of sustainability of the Baltic States differed from each other, however, all of them came nearly to the same result, i.e. Estonia fixed the national currency to the rate of DM, Lithuania fixed to US dollar and Latvia dixed to SDR. In 1992, Estonia exchanged the Soviet rubles at the market rate of 10:1 and equated Krone at a rate of DM/EEK 8. Lithuania replaced the intermediate currency in the form of coupon by Lit in June 1993, and pegged it to US dollar at a rate of USD/LTL 4 in April 1994. It is interesting that in 1936 the rates of Estonian Krone, Lithuanian Lit and Latvian Lat against US dollar were following: USD 1/EEM 6.95/LTL 4.38/LVL 5.04. In 1999, the rates of three Baltic currencies to US dollar were respectively: USD 1/EEK 11.2/LTL 4/LVL 0.59. The high rate of Latvian Lat stimulated a wide import of consumer goods displacing the Latvian producers from domestic market that brought to the decrease in internal accumulation. In 1936, the gold content of Latvian Lat was 0.29032254 grams of gold, and its parity to dollar equalled USD/LVL 3.03. The rate of Latvian Lat at the Riga Exchange quoted at the same level. However, after adoption of law "On Currency Reform" on September 28, 1936, which provided the devaluation of Latvian Lat by 40 %, its rate at the Riga Exchange decreased to USD/LVL 5.04. The results of research testifies the mistakes of the central bank made at the moment of establishment of national currency exchange rate. The country had a possibility to provide unreasonably high rates of GDP growth due to the overestimated currency especially in the mid-2000s.