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Adoption of the Euro and the European Countries Economies - Essay Example

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The research aims to analyze the benefits and challenges of the euro as the single currency for the nations of the European Union. The adoption of the euro has been benefactor for the economies of the European nations, if we consider only the major macroeconomic variables as important measuring variables…
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Adoption of the Euro and the European Countries Economies
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Download file to see previous pages It is evident from the study that the need to achieve a stable monetary and economic stability for these countries, the need for appropriate rule of law and respect for the human rights and the protection for the minorities, the proper and efficient functioning of the market economy, to enhance the capability of all the countries to work together in the face of economic as well as political crises and pressure of the market forces etc. It was also aimed to achieve full cost transparency and price transparency. These were aimed to achieve for the single market for goods and services as well as for labour and capital. They aim was focused on the achievement of the exchange rate stability and economies of scale in the production process and hence on an efficient market mechanism with efficient market allocation and distribution of resources. Among the other major economic goals, the need for an introduction of low inflation and low level of long-term interest rates for the member countries. The benefits obtained from the adoption of the euro can be discussed considering two perspectives. One is from the point of view of the economies of each countries and the other from the perspective of the euro zone as a whole. Considering first the entire euro area it can be said that the adoption has helped all the countries to achieve greater economic and monetary stability. It also helped to achieve greater economies of scale as well as greater economies of scope in the production of goods and services. ...
g the other major economic goals, the need for an introduction of low inflation and low level of long-term interest rates for the member countries (Tumpel-Gugerell, 2007). Benefits: The benefits obtained from the adoption of the euro can be discussed considering two perspectives. One is from the point of view of the economies of each countries and the other from the perspective of the euro zone as a whole. Considering first the entire euro area it can be said that the adoption has helped all the countries to achieve greater economic and monetary stability. It also helped to achieve greater economies of scale as well as greater economies of scope in the production of goods and services. It also helped in achieving efficient market outcomes with efficient allocation of scarce resources of the economies along with efficient distributions. The biggest benefit from the adoption was the exchange rate stability and the price stability among the member countries. After the adoption, the European countries experienced low rate of inflation and lower rate of long-term interest rates (Tumpel-Gugerell, 2007). There has been a process of convergences with respect to stable long-term interest rates and low inflation rates. After the adoption of the euro, monetary policies became more credible to the markets compared to the pre-adoption period. This was one of the major benefits that the eurozone has acquired from the introduction of a single monetary authority. The monetary policies were initiated with the major goal of reaching price stability and interest rate stability. The targeted inflation rate was mentioned to be within 2 % in the medium run (Schadler, 2005, pp. 106-110). Events, such as oil price shock in the early 1990s, have created great barriers to achieve this price and ...Download file to see next pagesRead More
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