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Five years in a balloon: Estimating the effects of euro adoption in Slovakia using the synthetic control method

Author

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  • Branislav Žúdel

    (Ministry of Finance, Slovak Republic)

  • Libor Melioris

    (Ministry of Finance, Slovak Republic)

Abstract

We analyse the effect of Slovakia’s euro adoption in 2009 on the country’s economic performance by using the synthetic control method. This method compares Slovakia’s economic performance with that of a weighted combination of comparable Central European economies that have remained outside the Euro zone. We estimate that by adopting the euro, Slovakia gained 10% of real GDP per capita by 2011. Strong anticipation effects are present as two thirds of this gain occurred already in 2008. Nevertheless, had Slovakia postponed adoption of the EUR by one year and kept its own currency during the recession in 2009, the economy would have been temporarily better off that year by 2%. These results survive various robustness tests. Cinq années en ballon : Les effets de l'adoption de l'euro par la Slovaquie estimés par la méthode des contrôles synthétiques Nous analysons l'effet de l'adoption de l'euro par la Slovaquie en 2009 sur la performance économique du pays en utilisant la méthode de contrôle synthétique. Cette méthode compare la performance économique de la Slovaquie avec celle d'une combinaison pondérée d’économies d'Europe centrale comparables qui sont restées en dehors de la zone Euro. Nous estimons qu’en adoptant l'euro, la Slovaquie a gagné 10% du PIB réel par habitant à l’horizon 2011. D’importants effets d'anticipation ont été à l’oeuvre dans la mesure où les deux tiers de ce gain ont eu lieu en 2008. Néanmoins, si la Slovaquie avait reporté l'adoption de l'euro d’une année et gardé sa propre monnaie pendant la récession en 2009, les performances économiques aurait été amélioré temporairement de l’ordre de 2% en 2009. Ces résultats restent valides sous divers tests de robustesse.

Suggested Citation

  • Branislav Žúdel & Libor Melioris, 2016. "Five years in a balloon: Estimating the effects of euro adoption in Slovakia using the synthetic control method," OECD Economics Department Working Papers 1317, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1317-en
    DOI: 10.1787/5jlv236zqj7b-en
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    Cited by:

    1. Rumen Gechev & Ivailo Beev & Yanko Hristozov, 2020. "Expected Effects of the Euro Adoption in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 19-44.
    2. Augusto Cerqua & Roberta Di Stefano & Guido Pellegrini, 2023. "What kind of region reaps the benefits of a currency union?," Journal of Regional Science, Wiley Blackwell, vol. 63(3), pages 552-582, June.
    3. Bod, Péter Ákos & Pócsik, Orsolya & Neszmélyi, György Iván, 2020. "Az euró és a szlovák gazdaság [The Euro and the Slovak Economy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 321-351.

    More about this item

    Keywords

    contrôle synthétique; croissance économique; economic growth; euro area; monetary union; synthetic controls; union monétaire; zone Euro;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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