The Long Run-Effects of the Poland’s Accession to the Eurozone

National Bank of Poland Working Paper No. 70

56 Pages Posted: 23 Jan 2011

See all articles by Tomasz Daras

Tomasz Daras

National Bank of Poland

Jan Hagemejer

National Bank of Poland; University of Warsaw - Faculty of Economic Sciences

Date Written: January 1, 2009

Abstract

The aim of this paper is to assess the non-monetary effects of the euro accession of Poland. The literature identifies two channels that potentially may affect the economy: (i) diminishing of investment risk premia through lower interest rates and cost of capital services and (ii) trade creation effects due to elimination of currency transaction spreads, better price comparability and elimination of currency risk. We employ a dynamic general equilibrium model with perfect foresight multiple households, adjustment cost of capital, disaggregated labor market. We directly model trade-driven productivity spillovers. Our simulations show a long run GDP gain from the euro accession at the level of 7.5% of benchmark GDP of which 90% is realized in first 10 years. The main factor behind growth is investment that leads to an extra 12.6 percent of extra capital accumulated in the long run. The welfare gains amount to roughly 2% of the value of GDP each year. The sensitivity analysis proves that the model behavior is reasonably resistant to parameter changes.

Keywords: dynamic computable general equilibrium, trade creation, monetary integration, Poland

JEL Classification: C68, E42, F1, E58

Suggested Citation

Daras, Tomasz and Hagemejer, Jan, The Long Run-Effects of the Poland’s Accession to the Eurozone (January 1, 2009). National Bank of Poland Working Paper No. 70. Available at SSRN: https://ssrn.com/abstract=1744789 or http://dx.doi.org/10.2139/ssrn.1744789

Tomasz Daras (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Jan Hagemejer

National Bank of Poland ( email )

00-919 Warsaw
Poland

University of Warsaw - Faculty of Economic Sciences ( email )

Dluga Street 44/50
Warsaw, 00-241
Poland

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