European Monetary Union
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This document discusses the history and development of the European Economic and Monetary Union (EMU). It began with the Treaty of Rome in 1957 which established the European Economic Community. The Werner Report of 1970 outlined a three stage plan for achieving EMU over 10 years. The European Monetary System was established in 1979 and led to the Maastricht Treaty in 1991 which set criteria for countries to join the Eurozone. On January 1, 1999 the euro was adopted as a non-physical currency and by 2002 it had replaced national currencies in Eurozone member states. The EMU is governed by the European Central Bank and Eurosystem which work to maintain price stability across the Euro area.
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European Monetary Union
The document discusses the creation and history of the European Economic and Monetary Union (EMU). It explains that the EMU was created both for economic and political reasons, including promoting growth, integration, and stability after issues with fluctuating currency exchange rates in the 1970s. The European Monetary System (EMS) was launched in 1979 as a precursor to the EMU to stabilize currencies and protect them from dollar fluctuations. The EMS established exchange rate limits but was asymmetric with Germany's currency dominating, which caused tensions. This led to discussions in the late 1980s and agreements, like the Single European Act and Delors Report, to further economic convergence and establish a true single currency, which became the Euro.
Forex management Study Note Calicut university
UNIVERSITY OF CALICUT
MASTER OF BUSINESS ADMINISTRATION
BUS4E F05/IB05 FOREX MANAGEMENT
Time 60 hours 4 credits
Module I
Meaning of the Term “Foreign Exchange”, Exchange Market, Statutory basis of Foreign Exchange, Evolution of Exchange Control, Outline of Exchange Rate and Types, Import Export India’s Forex Scenario: BOP crisis of 1990, LOERMS, Convertibility.Introduction to International Monetary Developments: Gold standard, Bretton Woods’s system, Fixed Flexible Exchange Rate Systems, Euro market.
Module II
Finance Function: Financial Institutions in International Trade. Non-resident Accounts: Reparable and Non Reparable, Significance for the Economy and Bank. Methods of IN Trade Settlement: Open Account, Clean Advance, Documentary Credit, Documentary Collection. -- Documentary Credits (Letter of Credit): Types of LC – Parties, Mechanism with illustration.
Module III
Documents involved in International trade: Statutory Documents, Financial Documents, Transport Documents, Risk Bearing Documents. INCOTERMS: C.I.F., F.O.B., C.I.P. Financing of Imports by Opening of Letter of Credit: Documents required, Trade and Exchange Control Formalities, Sanction of LC Limit. -- Export Finance: Financing of Export/ Deemed Export: Pre ship, and Post Ship Finance, Export Methods --, E.C.G.C. and other formalities. Uniform Custom Practices of Documentary Credits -- Uniform Rules Collection
Module IV
Introduction to Exchange Rate Mechanism: Spot- Forward Rate, Exchange Arithmetic - Deriving the Actual Exchange Rate: Forwards, Swaps, Futures and Options. Guarantees in Trade: Performance, Bid Bond etc.
European Monetary Union
The European Monetary Union (EMU) originated from the European Monetary System (EMS) established in 1979 to implement fixed exchange rates. The EMS has since developed into a more extensive economic and monetary union with coordinated policies among member countries. The EU and EMU were formed to create a unified European market, enhance political stability and economic growth, and eliminate risks from separate currencies. Currently 19 EU member countries use the euro currency as part of the EMU.
Emu (Economic and monetary union)
The Economic and Monetary Union (EMU) of the European Union was created in stages to coordinate economic policies and adopt a common currency, the euro. The Maastricht Treaty of 1991 laid out criteria for qualifying for the EMU and established a three stage process. Stage one involved capital flow liberalization. Stage two created the European Monetary Institute and strengthened economic coordination. Stage three established irrevocable currency conversion rates and introduced the euro under the European Central Bank. The EMU framework coordinates monetary, fiscal, and economic policies across EU members using the euro.
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European Monetary Union
The document discusses the creation and history of the European Economic and Monetary Union (EMU). It explains that the EMU was created both for economic and political reasons, including promoting growth, integration, and stability after issues with fluctuating currency exchange rates in the 1970s. The European Monetary System (EMS) was launched in 1979 as a precursor to the EMU to stabilize currencies and protect them from dollar fluctuations. The EMS established exchange rate limits but was asymmetric with Germany's currency dominating, which caused tensions. This led to discussions in the late 1980s and agreements, like the Single European Act and Delors Report, to further economic convergence and establish a true single currency, which became the Euro.
Forex management Study Note Calicut university
UNIVERSITY OF CALICUT
MASTER OF BUSINESS ADMINISTRATION
BUS4E F05/IB05 FOREX MANAGEMENT
Time 60 hours 4 credits
Module I
Meaning of the Term “Foreign Exchange”, Exchange Market, Statutory basis of Foreign Exchange, Evolution of Exchange Control, Outline of Exchange Rate and Types, Import Export India’s Forex Scenario: BOP crisis of 1990, LOERMS, Convertibility.Introduction to International Monetary Developments: Gold standard, Bretton Woods’s system, Fixed Flexible Exchange Rate Systems, Euro market.
Module II
Finance Function: Financial Institutions in International Trade. Non-resident Accounts: Reparable and Non Reparable, Significance for the Economy and Bank. Methods of IN Trade Settlement: Open Account, Clean Advance, Documentary Credit, Documentary Collection. -- Documentary Credits (Letter of Credit): Types of LC – Parties, Mechanism with illustration.
Module III
Documents involved in International trade: Statutory Documents, Financial Documents, Transport Documents, Risk Bearing Documents. INCOTERMS: C.I.F., F.O.B., C.I.P. Financing of Imports by Opening of Letter of Credit: Documents required, Trade and Exchange Control Formalities, Sanction of LC Limit. -- Export Finance: Financing of Export/ Deemed Export: Pre ship, and Post Ship Finance, Export Methods --, E.C.G.C. and other formalities. Uniform Custom Practices of Documentary Credits -- Uniform Rules Collection
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Introduction to Exchange Rate Mechanism: Spot- Forward Rate, Exchange Arithmetic - Deriving the Actual Exchange Rate: Forwards, Swaps, Futures and Options. Guarantees in Trade: Performance, Bid Bond etc.
European Monetary Union
The European Monetary Union (EMU) originated from the European Monetary System (EMS) established in 1979 to implement fixed exchange rates. The EMS has since developed into a more extensive economic and monetary union with coordinated policies among member countries. The EU and EMU were formed to create a unified European market, enhance political stability and economic growth, and eliminate risks from separate currencies. Currently 19 EU member countries use the euro currency as part of the EMU.
Emu (Economic and monetary union)
The Economic and Monetary Union (EMU) of the European Union was created in stages to coordinate economic policies and adopt a common currency, the euro. The Maastricht Treaty of 1991 laid out criteria for qualifying for the EMU and established a three stage process. Stage one involved capital flow liberalization. Stage two created the European Monetary Institute and strengthened economic coordination. Stage three established irrevocable currency conversion rates and introduced the euro under the European Central Bank. The EMU framework coordinates monetary, fiscal, and economic policies across EU members using the euro.
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The document provides information about several institutions and bodies that make up the European Union (EU). It discusses the European Commission, European Parliament, EU Council of Ministers, European Council, European Court of Justice, European Court of Auditors, European Central Bank, European Investment Bank, European Economic and Social Committee, and EU regional committee. It also briefly outlines some of the EU's policy areas, population, area, and spending. The main purpose is to outline the key components and structures that make up the EU system of governance.
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Federal reserve system
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(Central Banking in USA)
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Objectives of Monetary Policy
Board Of Governors.
Function of Federal Reserve System
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The document provides an overview of the European Economic and Monetary Union (EMU). It discusses the stages of economic integration in Europe leading up to the EMU, including the introduction of the euro. It outlines the key aspects of the EMU, including the coordination of economic policies and involvement of the European Central Bank. The document also reviews the historical development of the EMU from 1969 to 2015. It discusses both the economic and political perspectives for creating the EMU and provides criticism of its design and challenges faced, such as the financial crisis.
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3. SDRs can be allocated to IMF member countries to supplement their official reserves, with the amount based on their IMF quota share. They can also be used in transactions with the IMF or to represent the value of international financial contracts.
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2) The Eurozone has become the world's second largest economy.
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The document summarizes the monetary history of Europe from pre-17th century to the present. It describes how currencies originally used metals but bills of exchange later emerged. Public banks were established in the 17th-18th centuries in Amsterdam and London. The 19th century saw continued use of bills of exchange and the designation of certain currencies as legal tender within countries. The gold standard period from the late 19th century was unstable. Post-WWI and WWII attempts to restore monetary order included the Bretton Woods system and the European Monetary System (EMS), which evolved from a symmetrical system to one centered around the German Deutsche Mark.
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The emu is a large, flightless bird native to Australia. It can grow up to 2 meters tall and weigh over 100 pounds. Emus have small wings, three toes, and males have blue necks while females have gray-brown coloring. They live in grasslands and eat plants, seeds, fruits, and insects. Emus live in flocks and can run up to 30 mph. They are farmed commercially for their meat.
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Imf
The IMF monitors and makes policy recommendations regarding the international monetary system. It provides loans to countries experiencing economic crises or issues with their balance of payments. The IMF works to ensure stability in the international monetary system to facilitate balanced economic growth and development.
European Union
Regional grouping involves countries within a geographic area joining together for mutual benefit. The European Union began in the 1950s with six founding members and has since grown to include 28 member states. Key objectives of the EU include establishing a single market, customs union, and common policies around issues like agriculture, transportation, and social and economic goals. Members benefit from free trade and movement of goods, services, capital and people across borders, as well as increased economic and political influence on the global stage.
Special Drawing Rights
This document provides an overview of Special Drawing Rights (SDR) including:
1. SDRs were created by the IMF in 1969 as a supplemental international reserve asset to help address limitations of using gold and dollars.
2. The value of an SDR is determined by a basket of 5 currencies - US dollar, Euro, Chinese yuan, Japanese yen, and British pound - and their relative weights are adjusted every 5 years based on trade and reserves.
3. SDRs can be allocated to IMF member countries to supplement their official reserves, with the amount based on their IMF quota share. They can also be used in transactions with the IMF or to represent the value of international financial contracts.
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The IMF has played a role in shaping the global economy since World War II. It is an organization of 188 countries conceived at a 1944 UN conference to avoid competitive currency devaluations. The IMF's core responsibilities are to ensure monetary stability, secure exchange rates and payments systems, foster financial stability, and reduce poverty. It functions as a short-term lender of last resort providing currency reserves and advice to member countries.
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The document lists the team members of an organization and then provides information about the European Union (EU). It discusses how the EU was created in the aftermath of World War II to foster economic cooperation among European countries. It has now grown to include 28 member countries and has become the world's largest trading bloc.
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The International Monetary Fund (IMF) was founded in 1944 at the Bretton Woods conference to support the international monetary system and facilitate global trade. It is governed by 189 member countries and oversees the international monetary system through surveillance of members' economic policies. The IMF aims to foster global monetary cooperation, secure financial stability, facilitate trade, promote growth and reduce poverty. It provides loans to countries experiencing economic issues and offers technical assistance and training. However, the IMF's policy prescriptions and bailouts have been criticized for enabling poor policies and not being tailored to individual country needs.
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Geographical proximity, cultural, historical, and ideological similarities, competitive or complementary economic linkages, and a common language among the Partner States are importantly required for effective economic integration.
The aim of economic integration is to lessen costs for both consumers and producers, in addition to increase trade between the countries taking part in the agreement.
A primary economic objective of integration is to raise:
a) real output and income of the participants
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The PPT talks about the European Central Bank and its structure. It also touches the economic crisis which affected the bank mainly, Brexit and the European crisis
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The European Union is a unique economic and political partnership between 27 European countries that has delivered peace, stability, and prosperity over the past 50 years. It was initially created to foster economic cooperation but has evolved to span all areas of policy. The EU has its own flag, currency (euro), and anthem. It has a bicameral legislative branch consisting of the directly elected European Parliament and the Council of the European Union composed of national ministers. The European Commission acts as the executive branch. The Court of Justice of the European Union interprets EU law.
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The euro was adopted on January 1, 1999 by 12 of the 15 member states of the European Union as a single unified currency to replace individual national currencies like the French franc and German mark. On January 1, 2002, euro banknotes and coins were introduced and citizens exchanged their legacy currencies for euros, with the goals of creating a more stable economy, improving economic growth, and further integrating European financial markets and politics. While the euro has brought some economic benefits, issues around differing economic performance among countries and inability to independently adjust interest rates remain challenges.
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The document provides information about the Euro currency system. It discusses:
1) The Euro became the official currency of 11 EU member states known as the Eurozone in 1999.
2) The Eurozone has become the world's second largest economy.
3) Member states had to meet certain convergence criteria to join the Eurozone such as maintaining low inflation and deficit levels.
4) The European Central Bank was established to implement monetary policy for the Eurozone.
Euro currency markets
This chapter discusses the major international financial markets known as the Euromarkets. It covers the Eurocurrency markets, Eurobonds, Note Issuance Facilities, and Euro-commercial paper. The Eurocurrency market is composed of eurobanks that accept deposits in foreign currencies, dominated by US dollars. Eurobonds are bonds sold outside the country of the currency's denomination, often US dollars, and have grown substantially due to interest rate swaps. Note Issuance Facilities allow borrowers to issue their own notes placed by banks as a low-cost substitute for loans. Euro-commercial paper are unsecured short-term debt securities denominated in US dollars and issued by corporations and governments.
Currecny crisis
A currency crisis occurs when there is a sudden devaluation of a country's currency. This can be caused by chronic trade deficits, market speculation about a government's ability to back its currency, or a loss of confidence in the currency. A currency crisis often results in a speculative attack where investors rapidly sell the currency. This can force a country to abandon its exchange rate peg. Examples of major currency crises include the Mexican peso crisis in the 1990s and the Asian financial crisis of the late 1990s. The Argentine peso crisis in the early 2000s was caused by a fixed exchange rate that hurt exports and rising debt levels that led to sovereign default.
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The document discusses key components of the international financial system including money, banking institutions, financial instruments, financial markets, and central banks. It defines the international financial system as comprising all global financial institutions, borrowers, lenders, and regulators that facilitate the transfer of funds internationally. Key differences between the international monetary system and international financial system are also outlined.
International financial system
The document discusses the history and evolution of international monetary systems. It describes the gold standard system before WWI, the gold exchange standard in the 1920s-1930s, and the Bretton Woods system established in 1944 which pegged currencies to the US dollar backed by gold. The Bretton Woods system collapsed in the early 1970s leading to fluctuating exchange rates. More recently, there has been a movement towards more flexible exchange rate regimes and the establishment of the eurozone in Europe.
European Union powerpoint
The purpose of the European Union is for its member countries to work together to gain advantages that would be difficult to achieve individually, such as increased economic power and influence on the global stage. While the EU coordinates policies on issues like trade, education, and agriculture, each country maintains independent control over its own laws, military, and government. Key benefits of EU membership include free trade, an common currency (the euro) that facilitates commerce, and freedom of movement and rights to live and work across member nations. The EU currently has 27 member countries, though some European nations have opted to remain outside the bloc.
Role and function of imf
The International Monetary Fund (IMF) was conceived in 1944 and established in 1945 with 45 founding member countries. The IMF works to improve the economies of its member countries and oversees the global financial system by monitoring members' macroeconomic policies. It aims to stabilize international exchange rates and facilitate development through loans that require liberalizing economic policies. The IMF provides short-term loans to countries having balance of payments problems and is headquartered in Washington D.C.
Exchange rate determination
This document discusses foreign exchange rates and their determination. It explains that foreign exchange rates are the rates at which one country's currency can be converted into another's. These rates are determined by currency supply and demand in global foreign exchange markets. The key factors that influence supply and demand - and thus exchange rates - include interest rates, inflation rates, government budgets, and political stability. The document also outlines different exchange rate systems like fixed, floating, and managed rates.
Exchange rate system
1. The document outlines the history of currency exchange rate systems from the gold standard in the 1800s to the present day.
2. It describes the three main categories of exchange rate regimes: flexible exchange rates, managed floating, and fixed exchange rates.
3. Flexible exchange rates are determined by market forces, while managed floating involves some government intervention and fixed rates keep currencies at constant values against other currencies or currency baskets.
Floating exchage rate
1) The exchange rate is the rate at which one currency is traded for another. Exchange markets determine currency values based on supply and demand.
2) Countries trade goods and currencies through exchange markets. Equilibrium exchange rates are reached through supply and demand of each currency.
3) Factors like exports, imports, inflation rates, interest rates, and speculation can cause exchange rates to appreciate or depreciate. Appreciation increases a currency's purchasing power while depreciation decreases it.
I f
The European Monetary System (EMS) was established in 1979 to limit exchange rate fluctuations between European currencies and link them to the German Deutsche Mark. The EMS defined the European Currency Unit and required member currencies to remain within a narrow band of 2.25% fluctuation from each other. However, differing economic policies among members strained the system, and Britain withdrew in 1992. The EMS was replaced in 1998 by the ERM-II which used the new euro as an anchor and maintained the same fluctuation bands ahead of countries joining the eurozone and adopting the euro currency.
Eurozone debt crises
The document discusses the Eurozone debt crisis, providing background on the origins of the euro currency and how debt levels grew unsustainably in Greece, Portugal, Italy and Spain (PIIGS countries). It explains that lack of fiscal controls allowed these countries to overspend for years. The crisis emerged in late 2000s when debt became unsustainable and these countries could no longer borrow from markets. They required bailouts from the EU, IMF and ECB to pay debts and stabilize banks. Root causes included bloated public sectors and uncompetitive economies that struggled with austerity reforms tied to bailout loans.
Euro zone crisis
The document discusses the Eurozone crisis that began in 2009. It started in Greece due to the country misreporting its economic statistics, which hid a large budget deficit. As the global financial crisis hit, it struggled with high debt and interest rates. Greece required a bailout package from the EU and IMF to avoid defaulting. The crisis spread to other southern European countries like Portugal, Italy, Ireland, and Spain, known as the PIIGS, who also had high debts and deficits. Austerity measures were implemented but caused economic hardships.
International monetary system ppt @ bec doms mba bagalkot
This document provides an overview of the evolution of international monetary systems throughout history, including bimetallism, the classical gold standard, the Bretton Woods system, and the current flexible exchange rate regime. It discusses key concepts like fixed versus floating exchange rates and outlines several international monetary crises like the Mexican Peso Crisis and Asian Currency Crisis. The document also describes the development of the European Union's monetary integration, from the European Monetary System to the establishment of the Euro currency.
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"The European Monetary Union – Return to Stability" Questions and answers: Kl...
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International monetary system ppt @ bec doms mba bagalkot
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International economic ch20
This document summarizes the evolution of the European single currency. It discusses how exchange rate cooperation developed through the European Monetary System from 1979-1998. The Maastricht Treaty of 1991 laid out criteria for countries to join the Eurozone and adopt the euro. The theory of optimum currency areas holds that fixed exchange rates are best for areas with high trade integration. Applying this framework, the decision to join the euro depends on whether the monetary efficiency gains from trade outweigh the economic stability losses from giving up an independent exchange rate.
Economic and Monetary union
What is Economic and Monetary Union?
Stages of Economic Integration
Historical development (1969-1991) + (1991-2015)
Economic & Political perspectives about EMU
Criticism of Economic and Monetary Union
Evolution and Threats to Euro
Written before the Euro Crisis set in, this paper explains how Euro evolved from 1990s till now and the threats it is facing because of countries like Greece being a part of Eurozone. However unfortunate, the bright part of the paper is that the predictions done in the paper are coming true now with S&P rating Greece as Junk and IMF coming out to bail it. Please email me at ankurdineshsharma@gmail.com for any further information and/or details on this.
The European Monetary System
The document discusses the origin and development of the European Monetary System (EMS) and the later introduction of the Euro. It describes how the EMS was established in 1972 to link European currencies and stabilize exchange rates. The Exchange Rate Mechanism formalized central rates for currencies within prescribed margins. The goals were greater stability and economic convergence. However, the EMS collapsed in 1992-1993 due to currency crises forcing rates outside margins. The Maastricht Treaty established the Euro and steps to economic and monetary union, including establishing the European Central Bank and requiring member states to meet fiscal and debt criteria. The Euro was officially launched in 1999 among 11 initial members.
Eurozone crisis
The document discusses the Eurozone crisis, its causes, and proposed solutions. It began with low interest rates fueling housing bubbles in countries like Greece, Ireland, Spain and Portugal. When the global financial crisis hit in 2008, it exposed flaws in the eurozone design like lack of fiscal coordination and inability of countries to use monetary policy. This led countries like Greece to face debt crises. The EU implemented emergency measures like bailout funds (EFSF, EFSM) and long-term reforms like the European Stability Mechanism and European Fiscal Compact to address fiscal profligacy. Proposed long-term solutions include a European fiscal union, eurobonds, and debt restructuring to reduce unsustainable debt levels
Monetary policy of EU
This document provides information about monetary policy in Europe. It discusses:
1) The stages of monetary union in Europe, from the elimination of capital controls in 1990 to the establishment of the euro in 1999.
2) The role and activities of the European Central Bank (ECB) in overseeing monetary policy for the eurozone. The ECB aims to maintain price stability below 2% inflation.
3) Criticisms of the ECB's approach, including its asymmetric inflation target and concerns about its focus on inflation over growth during economic downturns.
Euro Crisis - R Bays
The document provides information about the history and development of the Euro currency. It describes how the Euro was introduced in 1999 among 11 European countries and expanded to 17 member states. Key events that led to the adoption of the Euro include the 1992 Maastricht Treaty which set the criteria for countries to join the Eurozone. The document also discusses the economic and monetary benefits of having a single currency, as well as the institutions like the European Central Bank that manage the Euro.
8. International Currency and Currency Crisis
This presentation deals with Euro Phases, Benefit and Cost of the Euro, Euro and Implication for India, Trade Invoicing in Euro vs. Dollars and South East Asian Currency Crisis
European Central Bank
The European Central Bank (ECB) is the central bank of the Eurozone. It was established in 1998 and is headquartered in Frankfurt, Germany. The ECB has three decision-making bodies: the Executive Board which manages the bank's day-to-day operations, the Governing Council which defines euro area monetary policy, and the General Council which contributes to advisory work. The ECB's primary objective is maintaining price stability across the Eurozone. It aims for an inflation rate of below 2% annually. The ECB employs various monetary policy tools like open market operations and interest rates to influence money supply and economic growth.
Common commercial policy
The Common Commercial Policy began with the 1944 Benelux Union and 1957 Treaty of Rome establishing the European Economic Community (EEC) or Common Market among Belgium, France, Italy, Luxembourg, Netherlands, and West Germany. The EEC aimed to facilitate greater investment and trade among members through the free movement of goods, services, people, and capital. It established common agricultural, trade, and transport policies and allowed for future joint policies. Through various treaties, the EEC evolved into the European Union with its three pillars of economic cooperation, foreign policy, and judicial matters. The EU now seeks to maintain a stable and competitive euro zone economy through its economic and trade policies.
The European Monetary Union: the Never-Ending Crisis by Jaime Requeijo
The document discusses the ongoing crisis facing the European Monetary Union. It argues the Union was poorly constructed as political priorities took precedence over economic prudence. Member states also showed fiscal irresponsibility through growing public debts. This caused doubts among debt holders, increasing borrowing costs for vulnerable countries. The crisis was further exacerbated by economic downturns in several countries and spillover effects across financial markets. Measures adopted so far may not be enough to solve the problems plaguing the Union and further breakups remain a risk if issues are not addressed.
EURO Currency
The document provides information about the euro currency and the European monetary union in 3 paragraphs:
1) The euro is the official currency of the European Union and is used by 19 of its member states. It was introduced in 1999 and adopted in 2002 to increase economic integration and stability across the EU.
2) The Maastricht Treaty led to the creation of the euro and outlined convergence criteria for EU members to qualify for the eurozone. The European Central Bank was established to implement monetary policy for the eurozone.
3) Implementing the euro involved complex financial and economic changes across many markets and sectors. Member states transitioned from national currencies to the euro at different speeds, while ensuring contracts and obligations were
Euro
The document discusses the history and current state of the European Economic and Monetary Union (EMU). It covers the establishment of the euro, benefits and costs of a single currency, economic challenges facing the euro area, and Europe's response to the financial crisis. The euro area is experiencing its first recession since the euro's launch. The crisis has exposed weaknesses in EMU and differences between member states, calling into question the sustainability of a monetary union without further economic and political integration.
European union
The European Union began in 1950 as an agreement between France and Germany to pool their coal and steel resources to promote peace and economic cooperation. This agreement later expanded into the European Economic Community and today's European Union. The EU has grown from 6 founding members to 28 member states, with the most recent addition being Croatia in 2013. Key EU institutions that govern it include the European Commission, European Parliament, Council of the European Union, and Court of Justice. The EU aims to promote free movement of goods, services, capital and people across Europe.
Economic and monetary Union
The document provides an overview of economic and monetary union (EMU) in the European Union. It discusses how EMU was established through agreements in Maastricht in 1991 to further economic integration among EU member states. EMU involves coordination of economic and monetary policies across participating countries, including a single currency (the euro) and monetary policy set by the European Central Bank. While EMU has benefits like tax-free trade, some argue it does not serve the interests of individual countries and poses communication and policy challenges for members with differing economies.
European Union and Euro Zone
The European Union was formed after World War 2 to promote peace and economic prosperity in Europe. It started with treaties promoting trade and economic cooperation and has expanded over time to include policies for a common currency, open borders, and more political integration among member states. However, the EU faces ongoing challenges including disagreements over issues like immigration, the debt crisis in some member countries, and the UK's decision to leave the EU (Brexit). The path forward remains uncertain but could involve either deeper integration among core members or a looser, more intergovernmental structure.
Euro Zone Crisis
The Euro crisis has impacted several European economies like Greece, Spain, Italy, and Ireland. Greece got into trouble due to high government debt, deficits, and misreporting of economic statistics. After joining the Euro, it could borrow at lower rates, leading to overspending. Spain had a housing bubble that burst, causing high unemployment. Italy has long had high debt and low productivity. Ireland's property bubble also burst. These countries received bailouts with austerity measures imposed. While the crisis poses risks, India's trade and investment exposure to these nations is relatively small so the direct impact on India has been limited.
EMU and the Growth and Stability Pact (GSP)
This document discusses the link between the Economic and Monetary Union (EMU) and the Stability and Growth Pact (SGP) in the European Union. It provides background on the establishment of the EMU, including the convergence criteria laid out in the Maastricht Treaty. It then explains that the SGP was created to ensure fiscal discipline among EU member states after adopting the euro, as monetary policy was now centralized but fiscal policy remained at the national level. The SGP requires members to keep their budget deficit below 3% of GDP and debt below 60% of GDP in order to support monetary stability within the eurozone.
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The euro currency was introduced on January 1, 1999 initially by 11 European Union member states. Greece joined in 2001 bringing the total to 12 countries. These countries officially introduced euro banknotes and coins in 2002. The euro provided economic advantages like easier travel within the EU and removing currency risk from European trade. The European Central Bank and Eurosystem central banks manage and administer the euro. Most EU members are obligated to adopt the euro when certain criteria are met, though some like Denmark have exemptions. Currently 19 EU member states use the euro along with several other European countries.
Bpf
The World Bank (IBRD) was established alongside the IMF to provide long-term loans for international investment purposes where the IMF focused on short-term balance of payments issues. Owned by member governments, the World Bank aims to promote long-term development through loans for productive purposes when private capital is unavailable. It works complementarily with the IMF to increase incomes and living standards through short and long-term lending. The European Monetary System (EMS) was created to promote exchange rate stability between European Union members through a process of currency convergence criteria to pave the way for a single European currency, the euro.
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European Monetary Union
- 2. • Umbrella term for the group of policies aimed at converging the economies of all member states. • Instrument to further the objectives of the EU and improve the lives of citizens in the Member States. EMU members = Eurozone + Non-Eurozone members What is ?
- 3. The Treaty of Rome (1957) • On 25th March 1957, was signed the Treaty in Rome that gave birth to the European Economic Community (EEC). Common Market/European Community • The six founding member’s states: Belgium France Italy Luxembourg Netherlands West Germany Phase 1: From the Treaty of Rome to the Werner Report, 1957 to 1970
- 4. The Hague Summit (1969) The Werner group submitted its final report in October 1970, setting out a three-stage process to achieve EMU within a ten-year period. The final objective would be: 1) Irreversible convertibility of currencies; 2) Free movement of capital; 3) Permanent locking of exchange rates, or possibly a single currency. Phase 2: From the Werner Report to the European Monetary System, 1970 to 1979
- 5. Enlargement of EMU • First enlargement in 1973: Denmark, Ireland, United Kingdom. • 1980: Greece, Spain, Portugal • 1993-2013 additional sixteen countries joined.
- 6. Phase 3: From the start of EMS to Maastricht, 1979 to 1991 • The European Monetary System (EMS) • European Exchange Rate Mechanism (ERM) and European Currency Unit (ECU) • Maastricht Treaty on European Union (1991): Stage 1: the free movement of capital between Member States; Stage 2: convergence of Member States economic policies and strengthening of cooperation between Member States national central banks; Stage 3: introduction of the euro as the single currency of the Member States and the implementation of a common monetary policy
- 7. Phase 4: From Maastricht to the euro and the euro area, 1991 to 2002 • European Monetary Institute (EMI) • On 1 January 1999 the euro was adopted in non-physical form
- 8. “Convergence Criteria“ include five requirements: 1. currencies has to stay within the bands set by the ERM for at least two years; 2. long-term interest rates could not be more than two percentage points higher than those of the three, best-performing member states; 3. inflation had to be below a reference value (within 3 years prices may not be higher than 1,5% of best performer); 4. government debt had to be below 60% of GDP (or moving towards this objective); 5. budget deficits should be below 3%.
- 9. Institutional makeup of European Monetary Union EMU Eurosystem European system of central banks ECB + 18 NCBs of Euro area member states ECB + 28 NCBs of EU member states
- 10. Institutional makeup of EMU
- 11. ECB Monetary policy • Objectives - The main task is to deliver price stability • Instruments - Three types of instruments: Standing Facilities, Open market, Reserve requirements • Strategy - Two elements: Quantitative or Price stability objectives and two pillar assessment of risk to price stability