Is this the time for the British to swallow their pride, admit they made a mistake and beg to enter the eurozone? A growing number of people argue it is. They are wrong.
The reason for having a floating exchange rate is that it should float. In an uncertain world, an economy needs mechanisms of adjustment. The exchange rate is the most powerful such mechanism. Only exceptionally flexible or exceptionally open economies cope well with big shocks without any exchange rate flexibility.
The UK is now suffering relatively severely (and so “asymmetrically”) from six large negative shocks.
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