Joining the euro at the wrong exchange rate would trigger a return to boom and bust, according to research by Oxford Economic Forecasting.

The consultancy's report for the anti-Euro group, the No campaign, concluded that joining would substantially increase economic volatility and locking in at the wrong exchange rate would cause a full-blown boom-and-bust cycle over an eight-year period.

John Keating, southern regional co-chairman for the No campaign, said: "This study underlines the serious dangers of locking into the euro at the wrong rate and giving up the control of our economy.

"Why risk our current success for a political experiment that leads to a rise in inflation and higher unemp- loyment?"

The study also looks at the impact of various economic shocks on the UK economy inside the euro and the impact of various types of economic reform.

It said locking into the euro at 10 per cent too high an exchange rate would cost 275,000 jobs, reduce total gross domestic product by 4.2 per cent in the first three years of membership and increase inflation by 5.6 per cent.

The effect of global economic shocks such as an increase in oil prices, a recovery in the technology sector, or a US recession leads to greater volatility in prices, GDP and unemployment if Britain is inside the eurozone.

OEF said reform of the eurozone to bring labour markets and monetary policy more in line with British practices would smooth the shocks to a limited extent. Simon Buckby, campaign director of Britain in Europe, which is in favour of joining the euro, said: "This report ignores the wider economic benefits of membership."

Britain in Europe agrees that the conditions for membership must be right, and Mr Buckby said the OEF report confirmed there was a sustainable exchange rate at which Britain could join.

He added that staying out of the euro had already led to job losses because of the volatile exchange rate. Joining the European currency would make trade easier, thereby protecting jobs, he claimed.