Advanced Search
MyIDEAS: Login

Re-Evaluating Swedish Membership in EMU: Evidence from an Estimated Model

Contents:

Author Info

  • Ulf Söderström

Abstract

I revisit the potential costs and benefits for Sweden of joining the Economic and Monetary Union (EMU) of the European Union. I first show that the Swedish business cycle since the mid-1990s has been closely correlated with the Euro area economies, suggesting that common shocks have been an important driving force of business cycles in Europe. However, evidence from an estimated model of the Swedish economy instead suggests that country-specific shocks have been important for fluctuations in the Swedish economy since 1993, implying that EMU membership could be costly. The model also indicates that the exchange rate has to a large extent acted to destabilize, rather than stabilize, the Swedish economy, pointing to the costs of independent monetary policy with a flexible exchange rate. Finally, counterfactual simulations of the model suggest that Swedish inflation and GDP growth might have been slightly higher if Sweden had been a member of EMU since the launch in 1999, but also that GDP growth might have been more volatile. The evidence is therefore not conclusive about whether or not participation in the monetary union would be advantageous for Sweden.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w14519.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14519.

as in new window
Length:
Date of creation: Dec 2008
Date of revision:
Publication status: published as Reevaluating Swedish Membership in the European Monetary Union: Evidence from an Estimated Model , Ulf Söderström. in Europe and the Euro , Alesina and Giavazzi. 2010
Handle: RePEc:nbr:nberwo:14519

Note: IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Adolfson, Malin & Andersson, Michael K. & Lindé, Jesper & Villani, Mattias & Vredin, Anders, 2005. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," Working Paper Series 188, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jun 2006.
  2. Maurice Obstfeld and Kenneth Rogoff., 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research (CIDER) Working Papers C00-112, University of California at Berkeley.
  3. Adam Posen & Daniel Popov Gould, 2006. "Has EMU had any Impact on the Degree of Wage Restraint?," CESifo Working Paper Series 1783, CESifo Group Munich.
  4. Ehrmann, Michael & Fratzscher, Marcel & Gürkaynak, Refet S. & Swanson, Eric T, 2007. "Convergence and Anchoring of Yield Curves in the Euro Area," CEPR Discussion Papers 6456, C.E.P.R. Discussion Papers.
  5. Alex Cukierman & Francesco Lippi, 2000. "Labor Markets and Monetary Union; a Strategic Analysis," Temi di discussione (Economic working papers) 365, Bank of Italy, Economic Research and International Relations Area.
  6. De Santis, Roberto A., 2006. "The geography of international portfolio flows, international CAPM and the role of monetary policy frameworks," Working Paper Series 0678, European Central Bank.
  7. Jonas Tallberg, 2008. "Bargaining Power in the European Council," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 685-708, 06.
  8. Nicolas Coeurdacier & Philippe Martin, 2009. "The geography of asset trade and the euro: Insiders and outsiders," NBER Chapters, in: Financial Globalization, 20th Anniversary Conference, NBER-TCER-CEPR National Bureau of Economic Research, Inc.
  9. Alejandro Justiniano & Bruce Preston, 2006. "Can Structural Small Open Economy Models Account For The Influence Of Foreign Disturbances?," CAMA Working Papers 2006-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  10. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009. "New Keynesian Models: Not Yet Useful for Policy Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 242-66, January.
  11. Baldwin, Richard E., 2006. "The euro’s trade effects," Working Paper Series 0594, European Central Bank.
  12. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2008. "Evaluating an estimated new Keynesian small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2690-2721, August.
  13. Romain Duval & Jørgen Elmeskov, 2005. "The Effects of EMU on Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 438, OECD Publishing.
  14. Lindé, Jesper, 2003. "Monetary Policy Shocks and Business Cycle Fluctuations in a Small Open Economy: Sweden 1986-2002," Working Paper Series 153, Sveriges Riksbank (Central Bank of Sweden).
  15. Steinar Holden, 2003. "Wage-setting under Different Monetary Regimes," Economica, London School of Economics and Political Science, vol. 70(278), pages 251-265, 05.
  16. Lane, Philip R., 2005. "Global bond portfolios and EMU," Working Paper Series 0553, European Central Bank.
  17. Daniel Naurin, 2007. "Network Capital and Cooperation Patterns in the Working Groups of the Council of the EU," EUI-RSCAS Working Papers 14, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  18. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  19. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  20. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," Research Department Publications 4339, Inter-American Development Bank, Research Department.
  21. Rebecca Adler-Nissen, 2008. "The Diplomacy of Opting Out: A Bourdieudian Approach to National Integration Strategies," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 663-684, 06.
  22. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," IDB Publications 6511, Inter-American Development Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Amisano, Gianni & Giammarioli, Nicola & Stracca, Livio, 2009. "EMU and the adjustment to asymmetric shocks: the case of Italy," Working Paper Series 1128, European Central Bank.
  2. Riccardo DiCecio & Edward Nelson, 2009. "Euro membership as a U.K. monetary policy option: results from a structural model," Working Papers 2009-012, Federal Reserve Bank of St. Louis.
  3. J James Reade & Ulrich Volz, 2010. "Too Much to Lose, or More to Gain? Should Sweden Join the Euro?," Discussion Papers 10-13, Department of Economics, University of Birmingham.
  4. Herbert S. Buscher & Hubert Gabrisch, 2011. "What Might Central Banks Lose or Gain in Case of Euro Adoption – A GARCH-Analysis of Money Market Rates for Sweden, Denmark and the UK," IWH Discussion Papers 9, Halle Institute for Economic Research.
  5. Carlo A. Favero, 2010. "Comment on "Euro Membership as a U.K. Monetary Policy Option: Results from a Structural Model"," NBER Chapters, in: Europe and the Euro, pages 440-445 National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14519. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.