Economic Costs and Benefits of EMU Membership from the Perspective of a Non-member

The result of the decision whether to join the European Monetary Union, an irreversible policy choice for several European Union members, presents potentially significant costs and benefits. With a focus on the largest EU economy outside of the euro, Sweden, this paper applies the novel synthetic control method of estimation to evaluate whether there are costs or benefits associated with EMU membership in terms of various aspects of economic performance and how these have developed from 1999 to 2015. Findings indicate that Sweden would have borne non-negligible costs from currency union membership, exemplified by around 10% lower productivity, exports, investment, and consumption, and 8% greater government expenditure and imports on a yearly basis since the introduction of the euro, leading to significant cumulative reductions in potential economic activity. The robust results suggest costs may be persisting and in some cases growing in magnitude.