HC Deb 13 February 1985 vol 73 cc201-2W
Mr. Austin Mitchell

asked the Chancellor of the Exchequer what was the natural effect on the exchange rate of his simulation on the relationship between real wages and employment; whether the assumed relationship between the exchange rate and prices was the same as that set out in Treasury working paper No. 2; and whether he will publish in the Official Report the relevant data together with the unemployment figures for manufacturing and for the whole economy.

Mr. Peter Rees

The effect on the effective exchange rate in simulations of lower real wages under various assumptions about fiscal and monetary policy is shown in tables A to D of annex B of the recent paper by Treasury officials entitled "The Relationship between Employment and Wages". The effects on employment in the whole economy are also contained in these tables; the relevant figures for employment in manufacturing, consistent with table A, are:

Percentage change from base
Year 1 0.2
2 1.2
3 2.0
4 2.2

The relationship between the exchange rate and prices assumed on the Treasury model has altered since the publication of Treasury working paper No. 2. Changes to the model have been set out in successive issues of the technical manual. The most recent results of simulations of the effect of an exchange rate change were published in "HM Treasury Macroeconomic Model Technical Manual supplement 1984" (J. Barber ed.)