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The Pound and the Punt: A Study in Exchange Rate Policy
Author(s) -
BUDD ALAN,
DICKS GEOFFREY
Publication year - 1981
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/j.1468-0319.1981.tb00260.x
Subject(s) - pound sterling , economics , pound (networking) , allowance (engineering) , exchange rate , irish , depreciation (economics) , inflation (cosmology) , manufacturing sector , european monetary system , monetary economics , international economics , macroeconomics , market economy , operations management , linguistics , philosophy , physics , capital formation , financial capital , world wide web , computer science , theoretical physics , human capital
The rise in sterling during 1979 and 1980 was a remarkable and largely unexpected development While it has been accepted that the rise in the exchange rate played an important part in the reduction in the UK inflation rate during 1980 it has also been suggested that the appreciation of sterling was a major cause of the fall in output, particularly in the manufacturing sector. In this Viewpoint we attempt to assess the effect of the rise in sterling on output and inflation by comparing the performance of the UK economy with that of the Irish Republic. As a member of the European Monetary System (EMS), Ireland shared the general depreciation of the European currencies against sterling. We suggest that the result has been a higher rate of inflation in Ireland than in the UK Also, although the Irish manufacturing sector avoided the UK's loss of competitiveness, the fall in manufacturing output in Ireland during 1980 was ‐ when allowance is made for a higher underlying rate of growth in Ireland ‐ comparable to that in the UK