The U.K. Business Cycle, Monetary Policy, and EMU Entry

December 1, 2000

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Format: Chicago

Hossein Samiei, and Zenon Kontolemis. The U.K. Business Cycle, Monetary Policy, and EMU Entry, (USA: International Monetary Fund, 2000) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In the context of the U.K. government’s EMU entry condition of cyclical convergence, this paper (i) provides further evidence suggesting that historically the U.K.’s business cycle has been more volatile than, and relatively independent of, the cycles in the euro-area countries; and (ii) identifies, using a small VAR model, a relatively significant role for monetary policy in explaining these differences. A simulation exercise suggests that if the U.K. interest rates had been more closely aligned with those in the euro area in the 1990s (as they would be if the United Kingdom were to join EMU), output growth might have been less volatile and more correlated with that in the euro area, but inflationary pressures might have persisted.

Subject: Business cycles, Economic growth, Exchange rates, Foreign exchange, Inflation, Output gap, Prices, Production, Real effective exchange rates

Keywords: Business cycles, EMU, Europe, Exchange rate, Exchange rates, Growth cycle, Inflation, Monetary policy, North America, Output gap, Real effective exchange rates, U.K. business cycle, U.K. economy, U.K. government, U.K. interest rate, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/210
Stock No:

WPIEA2102000
ISBN:

9781451874792
ISSN:

1018-5941

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