Issues in international political economy Explain the advantages and disadvantages of a single currency with regard to the case of the euro and the euro zone countries. Has the euro and its governance brought about economic stability and growth to all the euro zone countries equally? One of the most substantial evidence of European integration is the euro, which is the most widespread currency in 19 out of 28 European countries. Euro is used by 338.6 million people every day. The advantage of the familiar currency is instantly evident to anyone travelling in a foreign country or shopping online on websites based in an additional EU country. The euro zone is formally called the euro area, which is the geographic and economic section that …show more content…
• Eradication of the expenses of converting currencies: for every personality and the organisation there is certain amount of charge to be paid while converting between the currencies. A single currency will help in elimination of such expenses. • Improved competition and effectiveness: since the better clearness in prices can be observed in the greater competition, the single currency should promote such competition which helps in increasing the effectiveness of an organisation because the organizations are forced to continue and be ready for action. • Increased Price Transparency: it is not easy to evaluate the prices in different currencies. It is not possible to carry a calculator every time to verify the price of something in foreign country. The price evaluation is clear-cut if the whole thing is in the same currency. The clearness in price may help the organizations cut costs, as they will be capable to find the cheapest item for consumption more effortlessly and efficiently. • Eradication of exchange rate uncertainty: due to the fluctuations in the exchange rate we never know which way the exchange rate moves, therefore it might be one of the problems while trading with other countries. The exchange rate can move in our favor and at the same time it may also not be in our favor, this kind of insecurity can hamper trade especially for the small business
Well it’s not good special for international student, we have to change more in our currency money to be US dollar. When U.S dollars stronger than national currency, import are less expensive. So American people can buy products good and services cheaper. In face it will lead to increase demand for the currency needed to purchase products and imported products because you can buy more products or the product is cheaper and it increase the economies in US. For example, we order clothes from china the same amount of money, we can buy more cloth and we won’t have to spend many money to do it. But for the business local currency becomes weak and down in valve, then the products in US are importing become more expensive. Also increase in the demand on the foreign change market more increases the price of its currency, Other country become demanding more US Dollars in order to pay for these services and commodities. International labor increase more if US dollars more strong so They can change US dollars more money in their countries, Changes in nationwide incomes in foreign countries as well as in the United States. On other hand export less because US dollars strong and other countries decrease demand products from US because US products good is more expensive. Also people buy foreign products rather than domestically produced goods and become to effect to US export. It capacity make business
Chapter 11: Global negotiations leave groups more fortunate. A government that is purposefully maintaining inflated currency is robbing buyers of imports and creators of exports. A deflated value has an opposing effect, making imports cheaper and exports less challenging. One piece of currency across the west reduces negotiations and encourages price transparency. However, the United States as an individual country are
The Euro and its Impact on the U.S. Economy The euro is the official currency of the following 12 European nations: Belgium, Germany, Greece, Spain, France, Luxembourg, Ireland, Italy, The Netherlands, Austria, Portugal, and Finland. Although it has been the official currency since January 1,1999 it became physical tender which can be used by all participating countries on January 1,2002. The introduction of the euro into the world was truly a historic event; it represented a unity never before seen in the history of Europe, a common currency. After years of negotiations and much skepticism from around the globe, the implementation of the euro is no longer an abstract ideal, but a change that nations, corporations, and investors must
The European Union (EU) is a unique economic and political partnership between 28 different countries. It consists of about half a billion citizens, and its combined economy represents about 20 percent of the world’s total economy (Briney, 2015). Today The European Union works as a single market, with free movement of people, goods and services from one country to another. There is a standard system of laws to be followed, and since 1999 many countries share a single currency called the Euro (Europa.eu, 2015). This essay will explore the background history of the European Union and the benefits and drawbacks of the European Union.
As of 2012, only seventeen of members of the European Union have decided to use Euros as their currency. In order for the members that adopted the Euro as their currency to successfully help their economic problems, the Eurozone members had to follow strict instructions put into place the European Union. The strict policies included strict control over inflation, government debt, and long-term interest rates (Mckee 525). The union put these strict policies into place to give the union the tools that it needed to take in order to help fix the economic crisis in each country participating in the Eurozone. Without the full cooperation of each country, it could cause the plans to fix the economic crisis within each country to fail because of the different interests by each individual country.
Exchange rates play a pivotal role in the relationships between individual economies and the global economy. Almost all financial flows are processed through the exchange rate, as a result the movements and fluctuations of the exchange have a significant impact on international competitiveness, trade flows, investment decisions and many other factors within the economy. Due to the increasing globalisation of the world economy, trade and financial flows are becoming more accessible
In Europe, the single currency created additional problems because of overvalued exchange rates, and high bond yields.” (Pettinger, 2013).
In order to minimise the effect of the potential losses due to foreign currency exchange rate, it essential to understand the use of financial instrument.
The euro (€) is the official currency of the Eurozone, which consists of 17 EU member states using this currency. The euro is also the 2nd largest reserve currency as well as the 2nd most traded currency in the world after the United States dollar. As of November 2013, with more than €951 billion in circulation, the euro has the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.
The economic advantages that participating member states enjoy over non-participating members are low inflation (due to its stability), more price transparency (consumers can compare prices more easily), less currency exchange costs, a more powerful global voice, protection from external economic shocks (ex. an unexpected rise in oil prices), easier travelling within the European Union, and more international trade (the low currency value increases the competitiveness of these countries' exports and this currency has a higher total stability).
Consequences regarding the international businesses and the flow of trade and investment among the three countries are given below as benefits and drawbacks of holding fixed exchange rate system-
Europe's challenges with the Euro are complicated. The United States congress had trouble agreeing to enact legislature to raise its debt ceiling in order to meet its obligations and maintain its credit ratings. In Europe, separate countries need to agree to come together with a combined political will to stabilize countries and banks in financial trouble. Without the power to print money individually, each country under the single currency must come together under combined policies. Today, Europe seems willing to reach combined policy decisions to avoid an economic disaster. Ultimately, if this happens, the Euro will have a stronger future just as the United States gained a stronger political and financial system from policies created as a result of the Great Depression. If Europe fails to come to agreement on combined policies to solve the European Debt Crisis the world will realize the financial risks.
We can not talk about economic integration or European Monetary System without speaking of the Economic and Monetary Union (EMU) is defined as: "Economic integration process whose ultimate goal was the creation of a single currency, the euro, and a single central bank (rector of economic and monetary policy) within the European Union (EU)”.
This creates a more stable economy and provides consumers more choices. When looking at the tourist industry a single currency is a tremendous advantage as it encourages cross-border traveling and increased shopping. Finally, the euro has developed clout. Today, the euro is one of the most important international currencies, second only to the United States dollar.
Discuss whether the Economic Community of West African States (ECOWAS) is an optimal currency area.