Beyond prospective accountancy : reassessing the case for British membership of the single European currency comparatively

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Hay, Colin ; Smith, Nicola Jo-Anne ; Watson, Matthew (2006)

The fact that Britain will, at most, be a late signatory to the single European currency means that the strategic deliberations it faces in deciding whether to enter EMU are rather different to those of earlier entrants. However, this crucial point is lost in almost all discussion of the subject. To date, the academic debate has been dominated by what we term 'prospective accountancy', in which a series of abstract counterfactuals ostensibly inform a stylised cost–benefit analysis. This article moves beyond such an approach by combining conjectures about the specificities of the British case with a concrete analysis of the experiences of the Eurozone member whose economy appears most closely to resemble Britain's: namely, Ireland. The comparative dimension of our work facilitates more empirically-based analysis of the merits and demerits of British entry into EMU. Yet, it is important not to lose sight of the limits of an exclusively comparative approach, for the British growth model is qualitatively different to that of other European Union economies. British growth since the early 1990s has been consumption led, and this in turn has been fuelled to a considerable degree by the release of equity from the housing market. The likely impact of EMU on the British economy will be determined to a significant extent, then, by its effect upon this key catalyst of British growth. Sadly, no retrospective comparison can inform such an assessment.
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