Black Wednesday – A Re-examination of Britain’s Experience in the Exchange Rate Mechanism



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Alan Budd examines sterling's ERM exit in the light of the UK's economic performance since 1992. There are also commentaries from Derek Scott, Tim Congdon and Samuel Brittan. The book can be purchased or a pdf can be downloaded below the summary
Alan Budd, discusses the contribution of ERM membership to Britain’s recent economic performance. Budd suggests that we joined the ERM “in despair” after trying various methods of controlling monetary growth without the success that had been anticipated. Whilst membership of the ERM did not happen at an ideal time, because of serious imbalances within and between member economies in the late 1980s, it did provide a discipline to reduce inflation that might have been difficult to maintain without membership.

The author discusses how membership of the ERM was a necessary precondition for the adoption of the stable and successful monetary arrangements that we have today.

Samuel Brittan, Tim Congdon and Derek Scott provide commentaries on Budd’s analysis. Congdon and Scott, in particular, have reservations about the case that Budd makes.

This collection provides an important contribution to the analysis of a very significant event in Britain’s recent economic and political history.

Other recent IEA publications on monetary policy include The ECB and the Euro: The first Five years by Otmar Issing. The minutes of the Shadow Monetary Policy Committee can also be downloaded from the SMPC section of the IEA website.

2005, Occasional Paper 135, ISBN 0 255 36566 7, 74pp, PB

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