Comment on "Dangers for Ireland of an EMU without the UK: some calibration results" by Frank Barry

Abstract

In the October 1997 issue of this journal Barry set out a simple model of the Irish economy. The model was designed to quantify the possible effects on Ireland of sterling weakness, where Ireland is a member of the EMU and the UK remains outside. In calibrating this model Barry made extensive use of a range of research on the supply side of the economy undertaken over the past decade in the ESRI. Within his model he examined the possible effects on the economy of EMU membership where wages are slower to adjust to exchange rate shocks in a downward direction than in an upward direction. As he points out in his article, in a period of low inflation this possibility, if realised, would increase the cost of a major fall in sterling.