The Swedish way: Turning down a common currency and its effects on economic development

Abstract: This thesis aims at evaluating the Swedish decision not to adopt the euro even though this is thought to bear economic benefits. In particular, my research confronts the question: What would have been Sweden’s economic development if the country would have adopted the euro in 1999? By taking advantage of the synthetic control method, I scrutinize the potential developments of both, Sweden’s bilateral trade flows and unemployment rate, respectively. According to the model, bilateral trade flows between the European Monetary Union and Sweden would have been 13.47 percent higher between 1999 and 2019. Moreover, 1.315 million jobs could have been created from substituting the Swedish krona within the same period. Hence, my findings suggest that the Swedish decision has arguably relinquished welfare gains as the country has not joined the European common currency experiment.