Macroeconomic Consequences of the Adoption of the Euro: The Case of Slovenia

On 1 January 2007, Slovenia adopted the euro as the first of the ten new EU member states. By means of simulations with SLOPOL6, a macroeconometric model of the Slovene economy, this paper examines the macroeconomic consequences that can be expected from this event. It is shown that after a short period of minor turbulences related to the introduction of the euro, the adoption of the euro brings about higher real GDP growth, a higher GDP level, more employment, lower inflation, a lower price level and improved public finances in the medium run. On the other hand, the current account deteriorates.