The improved inflation performance has come not at the expense of, but in conjunction with, output stability. Researchers have documented the so-called Great Moderation, in which the U.S. economy has achieved a marked reduction in the volatility of both real gross domestic product and core inflation over the past twenty years or so.
Even without participation in the EU Exchange Rate Mechanism, the lats has stayed within the +/- 15% band against the ECU and later the euro during this entire period. Fiscal policy in Latvia has always been implemented with EU accession in mind, thereby, in accordance with the European Stability and Growth Pact provisions, avoiding unsustainable government expenditure.