A Withdrawal from the Eurozone: Some Simulation Studies with the NiGEM Model

Paavo Suni

No 39, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract A withdrawal of a member state from the EMU due to market pressure has been a rather popular topic in the public debate in recent years. However, the effects of a withdrawal have been analysed quantitatively surprisingly little. Discussions have been concentrated on the crisis countries, but as the Finnish economic difficulties have deepened also on Finland. In the report, the effects of the potential withdrawal of Greece, one of the weakest economies in the EMU, is studied first. In addition we try to sketch the economic effects of a withdrawal of the relatively more balanced Finland. The analysis is made using an international econometric model (NiGEM), where the global economy and the individual economies are described in a rather detailed way based on economic theory and past economic behaviour. Benefits and costs, measured with effects on the GDP, of a withdrawal are related in the short and particularly in the longer run to the ability of labour markets to achieve sustainable wage agreements and to the ability to keep the financial markets calm.

Keywords: NiGEM; Simulation; EMU; Grexit; Fixit (search for similar items in EconPapers)
JEL-codes: F45 F47 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-11-14
New Economics Papers: this item is included in nep-cmp
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Citations: View citations in EconPapers (3)

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