The Potential Impact on Savings and Investment in Britain of Membership of the European Monetary Union: An Institutional Investor’s Perspective

Christopher Cheetham

Chapter 42 in European Monetary Union: The Kingsdown Enquiry, 1996, pp 293-306 from Palgrave Macmillan

Abstract: Abstract This paper discusses some of the implications for the savings and investments of British citizens, should Britain become part of the European monetary union (EMU). The discussion is split into three main parts: 1. The likely environment for savings and investment in EMU, when the system is established and adjustment to it is complete. This environment is referred to as the ‘steady state’. Also within this section is an analysis of the likely impact of sustainably low inflation, the potential loss of economic policy flexibility and the development of a wider bond market. Finally, there is a discussion of possible changes in investment patterns and their implications for the security of savings. 2. An examination of likely developments during the approach to 1999, the proposed implementation date of EMU. 3. An analysis of the crucial issues surrounding its implementation. The main conclusions are as follows. If EMU delivers sustainably low inflation in Britain, it is highly likely that a significant (further) acceleration in the trend towards fixed interest investment will occur. This expected shift in investor (saver) preferences would be a reflection of changing perceptions of risk rather than return, and will significantly improve the certainty of long-term savings and retirement planning.

Keywords: Exchange Rate; Monetary Policy; Government Bond; Bond Market; European Monetary Union (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-24825-4_42

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DOI: 10.1007/978-1-349-24825-4_42

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