Understanding the Baltic and Estonian puzzles : The  political economy of rapid external liberalization in  Estonia and Latvia

External liberalisation is usually hard to implement politically. Therefore the speed and depth of liberalisation in Estonia and Latvia raises a 'Baltic puzzle'.Estonia is also unique in that it has implemented free trade - the 'Estonian puzzle'.This paper uses political economy analysis of exogenous factors, interests, institutions and ideas to understand these two puzzles.The impact of the crisis of the early 1990s on interests and institutions is shown to be a precondition of the Baltic puzzle, but ideas and exogenous factors are more important in explaining actual policy choices.The Estonian puzzle is seen as the result of a unique configuration of political economy variables. Key words: political economy, external liberalisation, free trade, Estonia, Latvia