Would it have paid to be in the eurozone?

Michal Brzoza-Brzezina, Krzysztof Makarski and Grzegorz Wesołowski

No 70, Working Papers from Department of Applied Econometrics, Warsaw School of Economics

Abstract: Giving up an independent monetary policy and a flexible exchange rate are the key sources of costs and benefits entailed to joining a monetary union. In this paper we analyze their ex post impact on the stability of the Polish economy during the recent financial crisis. To this end we construct a small open economy DSGE model and estimate it for Poland and the euro area. Then we run a counterfactual simulation, assuming Poland's euro area accession in 1q2007. The results are striking - volatilities of GDP and inflation increase substantially. In particular, had Poland adopted the euro, GDP growth would have oscillated between -6% and +9% (-9% to +11% under more extreme assumptions) instead of between 1% and 7%. We conclude that during the analyzed period independent monetary policy and, in particular, the flexible exchange rate played an important stabilizing role for the Polish economy.

Keywords: optimum currency area; euro-area accession; emerging market (search for similar items in EconPapers)
JEL-codes: E32 E58 E65 (search for similar items in EconPapers)
Pages: 32
Date: 2013-10-23
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-dge, nep-eec, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/stru ... Papers/aewp04-13.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aewp04-13.pdf [301 Moved Permanently]--> https://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aewp04-13.pdf)

Related works:
Journal Article: Would it have paid to be in the eurozone? (2014)
Working Paper: Would it have paid to be in the eurozone? (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wse:wpaper:70

Access Statistics for this paper

More papers in Working Papers from Department of Applied Econometrics, Warsaw School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Marcin Owczarczuk ( this e-mail address is bad, please contact ).