§ Mr. Denzil Davies
It is not possible to give a precise estimate of the effect on the exchange rate of a high rate of wage inflation. This depends upon a number of other factors. The effect of an increase in unit wage costs on the unit value index for exports depends in part on the consequences for the exchange rate. On the artificial assumption that relative export prices in dollar terms remain unchanged between the United Kingdom and competitor countries, the effect of a rise in unit wage costs on the sterling unit value index for exports of360W manufactures will be roughly proportional in the long run. It is particularly difficult to make an estimate of the timing of such an effect.