EUROPEAN SINGLE CURRENCY - WHAT IS THERE TO GAIN/LOSE?

The UK's stance on the single currency.

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  • Created by: B_R_D
  • Created on: 14-03-14 08:13
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  • EUROPEAN SINGLE CURRENCY - WHERE DOES THE UK STAND?
    • DISADVANTAGES
      • Loss of independent monetary policy (ECB sets rates). This means BoE cannot react quickly to economic shocks.
        • Too deflationary? At the expense of employment
    • ADVANTAGES
      • Reduced transaction costs; no need to transfer currencies.
      • Reduced exchange rate uncertainty; protection against inter-union shocks.
      • Price transparency; consumers in all Eurozone economies can judge prices across the union; increased competition.
      • Increased investment directly into the UK.
      • Interest rates made on economic rather than political grounds.
    • DIFFERENT ECONOMIC CYCLES
      • The UK, unlike any of the Eurozone, exports oil.
      • The UK has a large house-owning tradition, thus meaning that borrowing is important. On the continent this is not, generally, the case.
      • The UK has the most international trade of any European country.
      • When the UK is in recession the Eurozone tends to be in boom, and vice-versa.

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