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The long run-effects of the Poland’s accession to the eurozone. Simulation using POLDYN – a dynamic computable general equilibrium model

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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.

Suggested Citation

  • Tomasz Daras & Jan Hagemejer, 2009. "The long run-effects of the Poland’s accession to the eurozone. Simulation using POLDYN – a dynamic computable general equilibrium model," NBP Working Papers 70, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:70
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    Cited by:

    1. Michał Gradzewicz & Krzysztof Makarski, 2013. "The business cycle implications of the euro adoption in Poland," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2443-2455, June.
    2. Krzysztof MAKARSKI & Michal GRADZEWICZ, 2009. "The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland," EcoMod2009 21500061, EcoMod.
    3. Michał Brzoza-Brzezina & Pascal Jacquinot & Marcin Kolasa, 2014. "Can We Prevent Boom-Bust Cycles During Euro Area Accession?," Open Economies Review, Springer, vol. 25(1), pages 35-69, February.

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    More about this item

    Keywords

    dynamic computable general equilibrium; trade creation; monetary integration; Poland;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F1 - International Economics - - Trade
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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