This paper analyses to what extent Poland should expect increased macroeconomic instability upon the accession to the euro area and the irrevocable fixing of the nominal exchange rate against the euro. The goal of this paper is, firstly, to bring forward a coherent theoretical framework for assessing the stabilisation costs that a small open converging economy incurs when its nominal exchange rate is fixed, and secondly, to empirically analyse whether nominal exchange rate flexibility has helped to stabilise Poland's output during the past decade. The theoretical analysis is based on the Dornbusch (1976) overshooting model and shows that the nominal exchange rate can only help to absorb demand shocks. In contrast, it propagates monetary and financial market disturbances on to the real economy, thus acting as a destabilising instrument when such shocks occur. The empirical analysis uses four different SVAR models with long-run identification restrictions á la Blanchard and Quah (1989). The general upshot is, firstly, that demand shocks in Poland relative to the euro area have largely been asymmetric and, secondly, that the flexible exchange rate of the Polish zloty against the euro has, to some extent, acted as a shock absorbing instrument, although this result is rather specification sensitive. We conclude that unless shocks in Poland become more symmetric relative to the euro area, one might expect an initial increase in output volatility after the adoption of the euro.