ABSTRACT
This chapter provides the evidence of economic history in the UK to establish whether membership of the European monetary union would be likely to produce significant benefits. It explores a basis for making a broad assessment of the likely gains to be secured from abolishing exchange rates between the UK and the relevant European countries. The chapter addresses the issue of whether the trade barrier effects of exchange rates have historically been sufficiently important to provide a key justification for European monetary union. It explains a basis for understanding how any trade barriers arising from the microeconomic costs of exchange rates would adversely affect the UK economy. Probably the most common macroeconomic justification for monetary union has been the control of inflation. The chapter demonstrates that it is possible to adopt a point of view in which the macroeconomic gains from monetary union are debatable or negative and, therefore, the existence of microeconomic benefits is critical for the issue of membership.
