Economist Lars Calmfors on the side of the euro in Sweden? The most obvious advantage of membership in the eurozone is the elimination of costs associated with currency exchange, but the gains are modest. It reaches approximately 0.1 to 0.2% of GDP. Most of the profits, on the other hand, come from joint trade and foreign investments. These are a reflection of the fact that the uncertainty regarding the exchange rate of the euro is disappearing, according to the economist based on his analysis. According to some estimates, the adoption of the euro increased trade between member countries by a total of 10 to 15% compared to a hypothetical scenario without a common currency. Trade with these countries increased by roughly half. At the same time, Sweden has already benefited from this effect, so the entry would probably increase trade with the Eurozone by another 5 to 7.5% on the basis of the mentioned numbers. And the impact on foreign direct investment is particularly strong. According to the analysis of the economist Forslid, the euro increased foreign direct investment between the eurozone countries by roughly 20%. What about the arguments against joining the eurozone? The main argument is the costs associated with the country-specific incidence stabilization policy. The adoption of the euro also entails the abandonment of an independent monetary policy and its own exchange rate. These concerns were behind the two recommendations that Sweden wait to join the eurozone. It was a time when the economy was recovering from a deep crisis and was burdened by high public debt, which limited the scope for fiscal stabilization. However, Jesper Hansson shows that, over time, the German economic cycle became more and more synchronized with the economic cycle of the Eurozone. A likely explanation is that deep trade and financial integration has boosted the transfer of eyes between countries. This should reduce the need for an independent monetary policy, Calmfors added. But that is not true, because the common monetary policy has a different impact on the country than on the Eurozone, the country's economy is more sensitive to annual rates, which reflects the high level of household debt and the short period of fixation of the annual rates. Changes in the ECB's annual rate could therefore be too large for Sweden. How can the weights be in relation to the base exchange rate and its stabilizing role? The Swedish krona weakened in periods of economic depression and strengthened in periods of economic growth, which helped to stabilize economic activity. However, the sharp weakening during the global supply chain in 2022 and 2023 contributed to inflationary pressures, thus complicating policy. In a geopolitically turbulent world, such disturbances can become frequent, which increases the risk that the exchange rate will move in an inappropriate direction, according to the economist. I continue to take weekends. https://cepr.org/voxeu/columns/it-may-be-time-sweden-join-euro» target=»_blank»>VoxEU claims that Sweden should become a member of the Eurozone. Reminder that Sweden decided to stay out of the monetary union in 1999, which is basically recommended. According to the government's analysis, the majority of the population rejected the adoption of the euro in 2003. Then the topic moved to the sidelines, but now, according to the economist, it is becoming more relevant. What are the main arguments for and against the euro in Sweden?
The most obvious advantage of membership in the eurozone is the elimination of costs associated with currency exchange, but the gains are modest. It reaches approximately 0.1 to 0.2% of GDP. Most of the profits, on the other hand, come from joint trade and foreign investments. These are a reflection of the fact that the uncertainty regarding the exchange rate of the euro is disappearing, according to the economist based on his analysis. According to some estimates, the adoption of the euro increased trade between member countries by a total of 10 to 15% compared to a hypothetical scenario without a single currency. Trade with these countries increased by roughly half. At the same time, Sweden has already benefited from this effect, so the entry would probably increase trade with the Eurozone by another 5 to 7.5% on the basis of the mentioned numbers. And the impact on foreign direct investment is particularly strong. According to the analysis of the economist Forslid, the euro increased foreign direct investment between the eurozone countries by roughly 20%. What about the arguments against joining the eurozone? The main argument is the costs associated with the country-specific incidence stabilization policy. The adoption of the euro also entails the abandonment of an independent monetary policy and its own exchange rate. These concerns were behind the two recommendations that Sweden wait to join the eurozone. It was a time when the economy was recovering from a deep crisis and was burdened by high public debt, which limited the scope for fiscal stabilization. However, Jesper Hansson shows that, over time, the economic cycle of the country became more and more synchronized with the economic cycle of the Eurozone. A likely explanation is that deep trade and financial integration has boosted the transfer of eyes between countries. This should reduce the need for an independent monetary policy, Calmfors added. But that is not true, because the common monetary policy has a different impact on the country than on the Eurozone, the country's economy is more sensitive to annual rates, which reflects the high level of household debt and the short period of fixation of the annual rates. Changes in the ECB's annual rate could therefore be too large for Sweden. The Swedish krona weakened in periods of economic depression and strengthened in periods of economic growth, which helped to stabilize economic activity. However, the sharp weakening during the global supply chain in 2022 and 2023 contributed to inflationary pressures, thus complicating policy. In a geopolitically turbulent world, such disruptions can become frequent, which increases the risk that the exchange rate will move in an inappropriate direction, according to the economist.