Choosing the Regime in an Uncertain World, the UK and Monetary Union
The UK has to take a decision on EMU membership at some point, and the costs and benefits have to be evaluated. Different policy frameworks result in differing outcomes for the means and variances of economic variables such as inflation, output, and nominal and real exchange rates and interest rates. Changing the level of uncertainty in the economy may change the equilibrium level of output and investment. Hence membership of EMU has to be evaluated in the light of its impact on the volatility of target variables and on the impact of volatility on the level of output and welfare. We discuss a theoretical framework within which we can discuss these issues, and we undertake stochastic simulation on a large, New Keynesian model including all the European economies in order to evaluate the effects of membership on the level and volatility of output. Our experiments suggest that membership of EMU would reduce volatility and as a result raise the sustainable level of output and employment in the UK.
|Date of creation:||04 Jun 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Office of the Secretary-General, Rm E35, The Bute Building, Westburn Lane, St Andrews, KY16 9TS, UK|
Phone: +44 1334 462479
Web page: http://www.res.org.uk/society/annualconf.asp
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ecj:ac2003:16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.