Economics of monetary union rapidshare

Embed Size px. Start on. Show related SlideShares at end. WordPress Shortcode. Share Email. Top clipped slide. Download Now Download Download to read offline. Emu Economic and monetary union Aug. European monetary union. Shekharaditya Patel Follow. Ostrich business in nepal. Presentation for-classification-to-livestock-from-wild-life-in-pakistan. Ostrich Farming. Given the strength of the case against joining the euro area, even before Brexit, it was increasingly doubtful whether the UK would every scrap the pound.

Indeed, the financial crisis re-opened a wider debate about the benefits of enlarging the euro-area. This debate has, clearly, been overshadowed Brexit. With the future of the EU itself now uncertain, there is the increased risk that some members of the euro-area, notably Greece and italy, might wish to revert back to their previous currencies.

The single currency does not appear to have led to any great reduction in price differences across Europe. It was thought that price transparency would have brought prices much closer together, but, without perfectly free trade and tax harmonisation, price differences are still likely.

For example, considerable price differences in many basic products, such as cigarettes, chocolate, and water, still persist, as indicated below:. Scottish independence , Sterling and the UK. Global economics. The euro-system The euro-system has two elements — the European Central Bank ECB , which is responsible for all monetary policy in the eurozone euro area , and the National Central Banks CBs of the 19 member countries. Co-ordination of macro-economic policies Co-ordination of policy was designed to enable the original 12 economies of the euro-area to converge.

The European Financial Stability Facility The EFSF was formed to help stabilise the European economies after the financial crisis, recession and sovereign debt crisis, and now forms a key element of the reformulated euro-system. The fiscal compact In attempt to prevent EU countries from running up further debts, the majority of the EU states signed a fiscal compact which opened up their domestic budgets to collective scrutiny.

The advantages of the Euro There are several significant benefits of having a single currency area. These are primarily derived from the benefits of fixed exchange rates, and include the following: Transparency Producers and tourists can more easily compare the prices of international goods, services and resources. Lower transaction costs Transaction costs are reduced because there are no commission payments to financial intermediaries.

Certainty and investment The Euro creates certainty because firms can predict the cost of imported raw materials and can set the price of their exports, which means they can plan, and are more likely to invest. Trade creation Trade between members of a single currency area is likely to increase because of the benefits of sharing a currency.

Create your free account to continue reading. Sign Up. Upcoming SlideShare. Embed Size px. Start on. Show related SlideShares at end. WordPress Shortcode. Share Email. Top clipped slide. Download Now Download Download to read offline. Economic and Monetary union Oct. Abdul Basit Adeel Follow. Member of Student Union.

Development of the Treaty of Lisbon. It may be that business cycles will become more synchronized across Europe as trade linkages increase, or that labor mobility or fiscal federalism EU transfers of wealth from one EU country to another will develop over time.

Further, it should be noted that much of the motivation for the monetary union in Europe was not economic, but political. Policymakers seem to value monetary union as a stepping-stone toward greater political integration, quite separate from its economic implications. The development of monetary union in Europe was a gradual political process. Monetary union was a stated objective as early as Werner Report , but it was not until that concrete steps were laid out for achieving this objective Delors Commission.

A controversial part of this process was the set of criteria for who could join the union, as set forth in the Maastricht Treaty of This included restrictions on the level of fiscal debts and deficits, as well as a requirement for exchange-rate stability and convergence of national inflation rates. The fiscal restrictions proved difficult for many of the participants and were loosely enforced. The monetary union formally began in , though it was not until that the new currency began to circulate in physical form.

A governing council with representatives from each member country decides monetary policy. The ECB is insulated from political pressure: the president is offered an eight-year term, and governing council members are prohibited from taking instructions from their home governments.

The European Monetary Union has experienced some bumps in the road, with an early change of president and disagreement on how strictly to enforce restrictions on the size of fiscal deficits of member countries. Depending on the experience in Europe, one might expect to see future proposals for the formation of monetary unions in other regions of the world. Paul Bergin is an associate professor at the University of California at Davis and a faculty research fellow at the National Bureau of Economic Research.

Monetary Union By Paul Bergin. Further Reading Eichengreen, Barry. Summary of the theory and application to the European case. Levin, Jay H. A Guide to the Euro.