This paper uses a large scale dynamic stochastic general equilibrium (DSGE) model to analyze and simulate effects of Euro introduction in Poland. The authors investigate the effects of shocks directly connected with introduction of Euro currency in short run, such as real transaction costs shock, price level shock and interest rates shock. Besides short term effects, the long-term impacts associated with real appreciation pressure were also assessed.
The main findings are:
transaction costs reduction following Euro introduction would have the largest impact on macro variables, comparing to scenario of no euro zone entrance
lower interest rates connected with joining the euro zone should surge Polish GDP level in the long term by 0.45 percent
no long run effects of price shock were observed, yet such shock would have negative short run impact on the GDP
long run effects of joining euro zone would be mainly transmitted through the currency appreciation channel
simulation suggests inflationary impulse resulting from convergence may reach up to 2.32 percentage points yearly
In the conclusion the authors stress that the total effect of joining Eurozone for Poland is hard to estimate for two reasons. First, since various shocks have different time horizons, it is difficult to merge them together (for example, long run appreciation influence with short run shocks). Second, even if it would be possible to add certain shocks they should be properly weighted.