Britain and Emu: Assessing the Costs in Macroeconomic Variability

58 Pages Posted: 22 Mar 2004

See all articles by Patrick Minford

Patrick Minford

Cardiff University Business School; Centre for Economic Policy Research (CEPR)

David Meenagh

Cardiff University Business School

Bruce Webb

Cardiff University Business School

Abstract

Stochastic simulations are used on the Liverpool Model of the UK to assess the effect of UK euro entry on macroeconomic stability. Instability increases substantially, particularly for inflation and real interest rates. A key factor is the extent of the euro's instability against the dollar; by adopting a regional currency the UK imports this source of shocks, as well as losing its control of interest rates. The results are not highly sensitive to changes in assumptions about the degree of labour market flexibility, the use of fiscal policy, and increased convergence of monetary transmission.

Suggested Citation

Minford, Patrick and Meenagh, David and Webb, Bruce, Britain and Emu: Assessing the Costs in Macroeconomic Variability. The World Economy, Vol. 27, No. 3, pp. 301-358, March 2004. Available at SSRN: https://ssrn.com/abstract=514056

Patrick Minford (Contact Author)

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5728 (Phone)
+44 29 2087 4419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Meenagh

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5198 (Phone)
+44 29 2087 4419 (Fax)

Bruce Webb

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 2920 876802 (Phone)

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