OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

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Five years in a balloon

Estimating the effects of euro adoption in Slovakia using the synthetic control method

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.


Keywords: monetary union, euro area, synthetic controls, economic growth
JEL: C33: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models; O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; F15: International Economics / Trade / Economic Integration; F47: International Economics / Macroeconomic Aspects of International Trade and Finance / Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation: Models and Applications; F43: International Economics / Macroeconomic Aspects of International Trade and Finance / Economic Growth of Open Economies
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