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Giving up the euro can be a good and a bad idea

Author

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  • Thomas COUDERT

    (LaRGE Research Center, Université de Strasbourg)

  • Blandine ZIMMER

    (LaRGE Research Center, Université de Strasbourg)

Abstract

This paper investigates whether Denmark, Sweden and the UK made the right choice in giving up the euro by examining the consequence of this decision on their GDP per capita. We use the synthetic control approach to create a counterfactual scenario of how their GDP per capita would have behaved if they had joined the euro area. Our estimates suggest that only Denmark would have benefited from the adoption of the euro. In contrast, for Sweden and the UK, until 2010, the euro would have had a zero or negligible positive effect on their GDP. From 2010 onwards, however, we observe a significant divergence between their GDP and the counterfactual, revealing that both countries would have lost out with the euro. Still, this effect is more significant for Sweden than for the UK.

Suggested Citation

  • Thomas COUDERT & Blandine ZIMMER, 2023. "Giving up the euro can be a good and a bad idea," Working Papers of LaRGE Research Center 2023-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2023-01
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    File URL: http://ifs.u-strasbg.fr/large/publications/2023/2023-01.pdf
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    More about this item

    Keywords

    Euro; per capita income; synthetic control method;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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