Development of the Latvian Macroeconomic Model in the Context of Competitiveness

Competitiveness is very important for the development of any company, industry or country. It is even more significant in small open economies like Latvia, where local companies compete with foreign ones in the domestic market, and where exports are the major driving force of economic development due to the small domestic market. Therefore governments tend to find ways to help exporters and thus stimulate the economic growth of the country. However, the question arises as to whether any successful company can be supported, or should support be focused only on companies in particular industries or companies exporting to particular countries? It is important to note that within the European Union, according to the legislation the member states are allowed to support national companies only in special cases, as all the companies compete in the common market. A similar question can be posed by banks, which make decisions regarding loans to particular companies, investment organizations, and other interested parties. Moreover, the question is relevant not only in present terms, but also in regards to the future. Therefore it is important to determine which indicators illustrate competitiveness and how they can be incorporated in the macroeconomic model. The aim of the study is to distinguish which competitiveness indicators can be incorporated into the Latvian macroeconomic model to evaluate sectoral competitiveness.