Modelling Shocks and Adjustment Mechanisms in EMU (Paperback)

This publication is part of a set of 18 documents which have been prepared by H.M. Treasury to inform the assessment of the Government's five economic tests for Economic and Monetary Union (EMU) entry into the euro area. It looks at the macroeconomic implications of UK entry and how the costs of adjustment to economic shocks would compare inside and outside of EMU, in terms of interest rate policy and the determination of bilateral sterling-euro exchange rates. The study applies a new stylized model specifically designed to analyse adjustment processes in and out of EMU with possible UK entry in mind.