Analysis of Latvian integration processes in EU using system dynamics model

Abstract

Recent years were significant for the economy of Latvia due to essential changes in structure of economic system. Often in terns of changed economic conditions traditional statistical and econometric methods are not appropriate in order to specify main ways of further development. The current paper is focused on developing of model of economic integration of Latvia in the European Union. The novelty of the paper is related to the application of system dynamics method and to the study of integration processes in the European Union. The developed model considers basic elements of international economy and principles of European Union: free goods and capital movements, migration, contributions and grants; and, also, evaluates the influence of the Europeau Union on economic development of the country. Results of the model show both, positive and negative influence of the process of integration on the economic development of the country. The developed model can be applicable for analysis of economic situation in other countries of European Union.