520 - The benefits of a common European currency

Wetenschappelijke publicatie
Date 6 October 1997

This report concentrates on the benefits of a common European currency; in particular those of the convergence to a lower inflation level, reduction of exchange rate uncertainty, lower transaction and information costs and reduced price discrimination. Calculations with the general equilibrium model and the macroeconometric model EUROMON of the Bank show benefits from the inflation-convergence of 0,6%-point in real GDP, and from the other factors mentioned 1% to 4%-points. Total benefits in the long term could even be much higher in case where the introduction of the currency is associated with the reduction of the risk premium of investment(s). (Published in Tijdschrift voor Politieke Economie, 21 (2), pp. 48-65)