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

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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.

Suggested Citation

  • Michał Gradzewicz & Krzysztof Makarski, 2009. "The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland," NBP Working Papers 58, Narodowy Bank Polski, Economic Research Department.
  • Handle: RePEc:nbp:nbpmis:58
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    Cited by:

    1. Torój, Andrzej, 2010. "Adjustment capacity in a monetary union: a DSGE evaluation of Poland and Slovakia," MF Working Papers 4, Ministry of Finance in Poland, revised 11 May 2010.
    2. Brzoza-Brzezina, Michał & Makarski, Krzysztof, 2011. "Credit crunch in a small open economy," Journal of International Money and Finance, Elsevier, pages 1406-1428.
    3. Torój, Andrzej, 2015. "Macroeconomic Imbalance Procedure in the EU: a Welfare Evaluation," MF Working Papers 22, Ministry of Finance in Poland.
    4. Andrzej Torój, 2010. "Rationality of Expectations: Another OCA Criterion? A DSGE Analysis," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(3), pages 205-252, June.
    5. Slawomir Czech, 2015. "The Political Economy Of Staying Outside The Eurozone: Poland And Sweden Compared," Oeconomia Copernicana, Institute of Economic Research, vol. 6(3), pages 23-43, September.
    6. Michał Brzoza-Brzezina & Pascal Jacquinot & Marcin Kolasa, 2014. "Can We Prevent Boom-Bust Cycles During Euro Area Accession?," Open Economies Review, Springer, pages 35-69.
    7. Torój, Andrzej, 2012. "Excessive Imbalance Procedure in the EU: a Welfare Evaluation," MF Working Papers 11, Ministry of Finance in Poland, revised 03 Feb 2012.
    8. Andrzej Toroj, 2011. "Competitiveness channel in Poland and Slovakia: a pre-EMU DSGE analysis," NBP Working Papers 86, Narodowy Bank Polski, Economic Research Department.
    9. Jan HAGEMEJER & Tomasz DARAS, "undated". "The long run-effects of the Poland´s accession to the eurozone. Simulation using POLDYN - a dynamic computable general equilibrium model," EcoMod2009 21500037, EcoMod.
    10. Torój, Andrzej, 2017. "Managing external macroeconomic imbalances in the EU: the welfare cost of scoreboard-based constraints," Economic Modelling, Elsevier, vol. 61(C), pages 293-311.

    More about this item

    Keywords

    Monetary policy; EMU accession countries; Euro;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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