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The business cycle implications of the euro adoption in Poland

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Author Info

  • Michał Gradzewicz
  • Krzysztof Makarski

Abstract

This article analyses the macroeconomic impact of the loss of autonomous monetary policy after the euro adoption in Poland. Using a two-country Dynamic Stochastic General Equilibrium (DSGE) model with sticky prices and wages, we find that the euro adoption will have a noticeable impact on the magnitude of economic fluctuations. In particular, the volatility of output, interest rate, consumption and employment is expected to increase while the volatility of inflation should decrease. 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.

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File URL: http://hdl.handle.net/10.1080/00036846.2012.667550
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 17 (June)
Pages: 2443-2455

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Handle: RePEc:taf:applec:45:y:2013:i:17:p:2443-2455

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Cited by:
  1. Michał Brzoza-Brzezina & Krzysztof Makarski & Grzegorz Wesołowski, 2012. "Would it have paid to be in the eurozone?," National Bank of Poland Working Papers 128, National Bank of Poland, Economic Institute.

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