Giving up the euro can be a good and a bad idea

Thomas Coudert and Blandine Zimmer ()
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Blandine Zimmer: LaRGE Research Center, Université de Strasbourg

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: This paper investigates whether Denmark, Sweden and the UK made the right choice in giving up the euro by examining the consequence of this decision on their GDP per capita. We use the synthetic control approach to create a counterfactual scenario of how their GDP per capita would have behaved if they had joined the euro area. Our estimates suggest that only Denmark would have benefited from the adoption of the euro. In contrast, for Sweden and the UK, until 2010, the euro would have had a zero or negligible positive effect on their GDP. From 2010 onwards, however, we observe a significant divergence between their GDP and the counterfactual, revealing that both countries would have lost out with the euro. Still, this effect is more significant for Sweden than for the UK.

Keywords: Euro; per capita income; synthetic control method (search for similar items in EconPapers)
JEL-codes: F15 F33 N14 O52 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-eec, nep-int and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2023-01

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