Contemporary Economy (Sep 2017)
POLAND IN AND OUTSIDE THE EURO ZONE – RISKS AND BENEFITS IN THE LIGHT OF NEW POLITICAL AND ECONOMIC DETERMINANTS
Abstract
This article analyzes the benefits and risks of Poland adopting the euro in the light of current political and economic conditions. For this purpose, the following research methods were used: literature research, intuitive method and descriptive statistics. Poland has fulfilled the criteria for nominal convergence for two years, apart from participating in the ERM II mechanism, but the political situation in the country precludes the adoption of measures leading to the euro zone. The future shape of this zone is yet unknown, as its closer integration is planned. Theoretical analysis indicates that the process of globalization makes it difficult for medium-sized, open-economy countries to pursue autonomous monetary and exchange rate policy, so the loss of these instruments after the adoption of the euro should not jeopardize long-term economic growth, even in the case of asymmetric shocks. The market mechanisms of restoring the balance and fiscal policy may then be used. The economy will also benefit from the elimination of transaction costs and exchange rate risks in the euro zone. The analysis shows that it is possible to use the opportunity for faster GDP growth associated with the adoption of the common currency if the right economic policy is pursued. Adopting the euro may also incur costs. For banks it can be the loss of foreign exchange earnings and commissions on FX hedge transactions. For the economy it can be the possibility of speculative bubbles, as a result of excessive consumption growth, caused by possibly too low interest rates. Expected benefits should, however, outweigh any losses.
