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Weak pound no cure for long term UK economic ills

Graham Watson

30th October 2016

Phillip Inman looks here at the suggestion that a weaker pound will be beneficial for the UK economy.

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This has obvious, intuitive appeal. However, thinking it through, you soon run up against all sorts of counter-arguments - will UK exporters keep their pound price the same? Do we have the spare capacity to meet any increase in demand? For what proportion of our exports is price a major determinant of trade? And are services part of that group?

And that's just for starters: the empirics of this aren't as clear cut as you'd expect either. Some economists argue that a strong pound is more likely to drive a search for efficiency that boosts international competitiveness to a greater extent.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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