Polly Allen’s paper reports the results of an interesting exercise. It explores the consequences of asymmetrical supply-side shocks on the output, income and price levels of the members of a monetary union, within a carefully specified analytical framework. In detail, the results of course must necessarily reflect the very precise assumptions of the model from which they are derived. Nevertheless, the spirit of the exercise must be that the experiment and its results speak to realistic concerns. Indeed, the particular choice of disturbance for examination is a good one. The comparative absence of such shocks has been suggested as a criterion for an optimal currency area whilst, closer to home, some observers have foreseen particular dangers for a country like the UK, prone to nominal wage disturbances, in joining the EMU and particular benefits for countries like West Germany, which are not so prone. Subject to a qualification, this paper speaks to those concerns. The qualification is that what most observers have had in mind in speaking of the British and German interests in EMU is, actually, not so much disturbances around the trends of nominal variables themselves as divergencies between the trends. At the level of direct analogy, the disturbance examined here is more akin to the famous ‘événetments de 1968’.
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