Choosing the rate: The sterling euro exchange rate is now right for EMU entry

摘要

Joining EMU means fixing the nominal exchange rate of sterling against the members of the eurozone. Over the last few years it has been apparent that the UK has been suffering from an overvalued exchange rate, but the scale of the overvaluation has not been clear because the dire consequences of extreme overvaluation never actually appeared. A significantly overvalued exchange rate would be a barrier to early entry into EMU, and this was a concern between 1998 and 2002.