The Grit of the Swedish Krona - An Artificial Implementation of the Euro in Sweden

Abstract

We estimate what would have happened to GDP per capita had Sweden joined the European Monetary Union in 1999, using the Synthetic Control Method. The donor pool for our analysis consists of eleven early adopters of the Euro that implemented the Euro in 1999. Our results suggest that joining the Euro would have had no immediate effects. Yet by having an independent monetary policy Sweden manage to handle the financial crisis in 2007-2008 and the following Euro-crisis in 2009 better than the counterfactual Synthetic Sweden which implemented the Euro in 1999. Our results suggest that the per capita GDP (in PPP) is on average 7% higher for the period 2001-2022 in Sweden still using the Krona relative to the doppelganger Synthetic Sweden using the Euro as currency. For the period 2009-2022, GDP per capita is on average 5% higher for Sweden than for Synthetic Sweden. This thesis suggests that Sweden would not have benefited economically from adopting the Euro when it was introduced in 1999.