The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland

Michał Gradzewicz and Krzysztof Makarski

No 58, NBP Working Papers from Narodowy Bank Polski

Abstract: There are many issues associated with the Eurozone accession of Poland. The goal of this paper is to analyse one, but very important aspect, namely - the macroeconomic impact of the loss of autonomous monetary policy. In order to answer this question, we build a two country DSGE model with sticky prices. We begin by evaluating the performance of our model. Next, we investigate how joining the Eurozone will affect the business cycle behaviour of the main macroeconomic variables in Poland. We find that the Euro adoption will have a noticeable impact on the Polish economic fluctuations. In particular, the volatility of domestic output increases and the volatility of inflation decreases. Also, in order to quantify the effect of the Euro adoption, we compute the welfare effect of this monetary policy change. Our findings suggest that the welfare cost is not large.

Keywords: Monetary policy; EMU accession countries; Euro (search for similar items in EconPapers)
JEL-codes: E52 E58 F33 F41 (search for similar items in EconPapers)
Pages: 46
Date: 2009-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:58

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