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Too Much to Lose, or More to Gain? Should Sweden Join the Euro?

  • J. James Reade
  • Ulrich Volz

This paper considers the costs and benefits of Sweden joining the European Economic and Monetary Union (EMU).� We pay particular attention to the costs of abandoning the krona in terms of a loss of monetary policy independence.� For this purpose, we apply a cointegrated VAR framework to examine the degree of monetary independence that the Sveriges Riksbank enjoys.� Our results suggest that Sweden has in fact relatively little to lose from joining EMU, at least in terms of monetary independence.� We complement our analysis by looking into other criteria affecting the cost-benefit calculus of monetary integration, which, by and large, support our positive assessment of Swedish EMU membership.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 442.

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Date of creation: 01 Aug 2009
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Handle: RePEc:oxf:wpaper:442
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  1. M. Hashem Pesaran & L. Vanessa Smith & Ron P. Smith, 2007. "What if the UK or Sweden had joined the euro in 1999? An empirical evaluation using a Global VAR," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(1), pages 55-87.
  2. Ulf Söderström, 2008. "Re-Evaluating Swedish Membership in EMU: Evidence from an Estimated Model," NBER Working Papers 14519, National Bureau of Economic Research, Inc.
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  7. Willem H. Buiter, 2000. "Optimal currency areas: why does the exchange rate regime matter? (with an application to UK membership in EMU)," LSE Research Online Documents on Economics 20178, London School of Economics and Political Science, LSE Library.
  8. Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-88, September.
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  13. Nielsen, Bent & Rahbek, Anders, 2000. " Similarity Issues in Cointegration Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(1), pages 5-22, February.
  14. Reade, J. James & Volz, Ulrich, 2011. "Leader of the pack? German monetary dominance in Europe prior to EMU," Economic Modelling, Elsevier, vol. 28(1-2), pages 239-250, January.
  15. Soren Johansen, 2002. "A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model," Econometrica, Econometric Society, vol. 70(5), pages 1929-1961, September.
  16. Emerson, Michael & Gros, Daniel & Italianer, Alexander & ,, 1992. "One Market, One Money: An Evaluation of the Potential Benefits and Costs of Forming an Economic and Monetary Union," OUP Catalogue, Oxford University Press, number 9780198773245, July.
  17. Willem H. Buiter, 2008. "Why the United Kingdom Should Join the Eurozone," International Finance, Wiley Blackwell, vol. 11(3), pages 269-282, December.
  18. Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895, June.
  19. Ferreira-Lopes, Alexandra, 2010. "In or out? The welfare costs of EMU membership," Economic Modelling, Elsevier, vol. 27(2), pages 585-594, March.
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