Poland’s economy benefited from having its own currency with a flexible exchange rate during the global economic crisis, central bank economists said in a study that comes as the nation debates adopting the euro.
The European Union’s biggest eastern economy, the only one in the 27-member bloc to avoid a recession after the crisis began in 2008, would have seen greater volatility had it used the euro instead of the zloty between 2007 and 2012, according to the report posted on the Warsaw-based bank’s website today.
“During the analyzed period, an independent monetary policy and, in particular, a flexible exchange rate played an important stabilizing role for the Polish economy,” according to the study by Michal Brzoza-Brzezina, Krzystof Makarski and Grzegorz Wesolowski of the bank’s Economic Institute.
Premier Donald Tusk has revived a debate about adopting Europe’s currency, which Poland pledged to eventually do after joining the EU in 2004. While the government has said it won’t set a date for the switchover because the economy still needs revamping, Finance Minister Jacek Rostowski said today that the nation risks a “dramatic marginalization” outside the euro.
With the euro, gross domestic product would have oscillated between a 6 percent contraction and growth of 9 percent between 2007 and 2012, rather than expanding between 1 percent and 7 percent, wrote the economists, who expressed their own views and not necessarily those of the central bank. Inflation would also have been more volatile with Europe’s single currency, the study concluded.
As the crisis spiked in 2009, “risk premium shocks hit the economy in a way that caused stabilizing exchange-rate movements” to the zloty, the study said. “Fixing the exchange rate would have removed this protection.”