Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Monetary policy in EMU (European monetary Union) - Essay Example

Comments (0) Cite this document
Monetary policy in EMU (European Monetary Union) Introduction The European Monetary Union is the agreement between the states of the European Union to adopt a common currency for the countries. The currency that has emerged from the agreement has been named as the Euro…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.4% of users find it useful
Monetary policy in EMU (European monetary Union)
Read TextPreview

Extract of sample "Monetary policy in EMU (European monetary Union)"

Download file to see previous pages Initially, the European Union included 12 countries, but since its inception in 1992, the area has expanded to include 17 countries in total (European Union, 2012). The financial crisis of 2007-08 had enhanced the importance of the austere economic regulation by the European Union. This essay covers the monetary policy that has been adopted by the European Union, keeping in mind the various pressing issues that have been a matter of concern in the European countries like, price stability, real economy stabilization and its future plans regarding inflation targeting. Monetary Policy of the European Monetary Union Rationale behind price stability and real economic stabilization Price stability implies that the purchasing power of citizens and the value of their savings will be independent to the exchange rate fluctuations in cross-border travels and investments. The Monetary policy in the Euro zone is conducted by the European Central Bank and has direct impact on the price stability and the interest rates. The main objective of the monetary policy by the EMU is to keep the rate of inflation hovering around 2%, so that the value of Euro can be protected (European Union, 2012). This is achieved by altering the rate of interest of lending by the banks. The objective of price stability in monetary policy is an integral part of maintaining moderate levels of inflation, so that the economy can avoid the risk of running into deflation. The European Central Bank and EMU have always tried to maintain the price stability because of the strong notion that by maintaining the price stability, the economic activity and employment levels of the country can be improved. The maintenance of price stability by the EMU ensures that the price level of any particular good or service acts independent to the general price level of the economy. Price stability also ensures that the creditors can be relaxed as the prices will not rise in future and there will be no need of inflation risk premium to compensate the losses from inflation. Unnecessary hedging activities and distortions in the tax and social security system can also be avoided by maintenance of price stability (European Central Bank, 2011). The price stability contributes to the stabilization of the real economy. Monetary Policy prior to the crisis Before the onset of the financial crisis, the EMU had been successful in maintaining the inflation rate, averaging to 2.04% from January 1999 to August 2007 (European Central Bank, 2012). This bears a testimony to the fact that since the formation of Euro, the Euro Zone has been quite successful in achieving its preliminary goal of maintaining price stability. The most interesting fact about the price stability in the EU was that the inflation rates were not only low, but also had low macroeconomic volatility compared to other advanced countries of the world. Figure 1: Inflation Rates in the Advanced Economies (Source: European Central Bank, 2012) The above figure shows the inflation rates in the industrialized economies of the world from 1999 to 2011. It can be seen that the monetary policy followed by the European Union, prior to the global financial crisis of 2007, has been in line with its objectives. In the course of time between 1999 and 2007, the European economy had undergone a lot of turmoil like, increasing global oil and food prices, increases in ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Monetary policy in EMU (European monetary Union) Essay”, n.d.)
Retrieved from
(Monetary Policy in EMU (European Monetary Union) Essay)
“Monetary Policy in EMU (European Monetary Union) Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Monetary policy in EMU (European monetary Union)

Monetary Policy

...?Monetary Policy Countries all over the world are regulated by a government that consists of different departments that carries out various functionssuch as building infrastructure, providing benefits to its citizens, giving opportunities to the unemployed etc. One of these important functions includes the regulation of money supply in the country. This is dealt by the monetary policy of that particular country that has its limitations and demand serious attention from not only the policy makers but also the public who would have to follow these policies. Money supply is governed by the Monetary Policy. But before explaining the Monetary Policy, one needs to understand money and its real purpose. Realizing the value of money is just...
3 Pages(750 words)Essay

Monetary policy

... Central banks are independent so that they operate under rules made to help them operate in a political free management (Kurgan and Wells 387). Therefore, this paper aims at obtaining a deep analysis on the role of central bank in use and implementation of monetary policy to stabilize the economy. This will be with respect to the great depression of 1929 to early 1940s. Monetary policy is the mean through which the monetary tools of a country control the flow of money. It mostly focuses on the rate of interest with an aim of promoting economic growth and stability. It is key role is to sustain, stable prices and maintain low levels of unemployment. Monetary policy can either be expansionary of contractionary. Expansionary policies increase...
7 Pages(1750 words)Research Paper

Monetary Policy

...? Monetary Policy Financial s and the Economy (INSERT SECTION Monetary Policy Financial s and the Economy Since the country’s founding, the United States Federal Government has struggled with the role and control of a central bank. The controversy surrounding the purpose of a central bank links to theoretical and practical economics and politics. Views concerning the control of a central bank vary from total autonomy to strict guidelines from Congress. In order to determine policy recommendations, the following is discussed: 1. Definitions of terms 2. The history and current role of the Federal Reserve system 3. The money supply and affecting factors 4. The cost of money and its affects on the economy 5. Assessment of the current economic...
8 Pages(2000 words)Essay

Monetary policy

...? Monetary Policy Answer one: Official cash rate is that rate of interest set by the Board of the ReserveBank of Australia which is charged on the overnight funds that are borrowed or lent between financial institutions. This implies that it is that rate which is charged by financial institutions in Australia’s banking sector to other banks for overnight loans. This official cash rate is an important monetary policy instrument that influences other interest rates within the market. The RBA often determines the official cash rate after deciding on what monetary policy target it intends to attain (Reserve Bank of Australia, 2012a). Such targets may include, increasing economic growth, lowering inflation. RBA uses open market operations...
5 Pages(1250 words)Essay

European Economic and Monetary Union (EMU)-Italy

...? First M. Section No. Italy European Economic and Monetary Union (EMU) European Economic and Monetary Union (EMU)--Italy 0 Introduction The European Union has become one of the successful treaties to overcome economic imbalance in the world. However, the Economic and Monetary Union of these European nations have created the recent economic crisis, which commenced in 2008. Italy, as one of its Member States, has been facing a serious economic downturn, and it is projected to last until the next two consecutive years. The German dominance in the European Union may have caused a lot of trouble in the policy implementation for economic terms. More than this, the recent recession is believed to have an impact on the economies of the world...
6 Pages(1500 words)Term Paper

Monetary policy

...? The Monetary Policy Of The Bank Of England Monetary Policy and how it Functions Economic stability and growth are important macroeconomic goals that must be pursued by all countries. To realize a steady and stable economic growth and development, it is important for the government through its relevant agencies to establish sound and sustainable economic policies. This starts from the macro and the micro levels of the economy (Stationery Office, 2006 p. 34). The economic stability of a country/state depends on the effectiveness of economic policies advanced in order to regulate the fiscal activities within the country and at the international levels. Therefore, to realize economic stability, it is paramount for the economic policies...
8 Pages(2000 words)Essay

European Monetary Union

In a sense, inefficient exchange of goods, because of price stability is hence discouraged and efficient economic transactions are thus promoted.
With all the obvious constancy in prices, it's not all peaches and roses for an optimum currency area. One drawback is that member nation doesn't have the prerogative to pursue its own independent growth and stabilization policies when faced with economic mishaps that might require particular policy measures. Expansionary fiscal and monetary policies can address uptight circumstances of one nation in its desperate call, but another nation may require what is otherwise. Participating economies do not at all face similar problems more so granted with the same solutions at the same t...
4 Pages(1000 words)Assignment

Monetary policy

... Monetary policy QN1. Four Chapters in “In Fed we Trust” Ten items I never new of before reading the book Key Playersof the worst financial Crisis i. Three men were responsible in managing the Great Panic. ii. The key individuals were the Treasury Secretaries, Mr. Hank Paulson, The Federal Chairman, Mr. Ben Bernanke, and Tim Geithner. iii. Details of each key player’s characteristics, and there effects on incomes. iv. Their personalities had a noticeable effect on the impacts their decisions had on the monetary system. v. The negative effects of their moves on the psyche of the markets vi. Geithner and Paulson were more prone to Gaffs than Bernanke in the public eye. vii. The biggest issue on stage for the key players was in the ever...
2 Pages(500 words)Assignment

Monetary Integration in the European Union

The use of a single currency within the European countries has ensured stability and positive inflation in most of the years that it has been under operation. The concept of money, as a means of measurement, can assist in comprehending why the stability of money was made a chief objective in the European monetary policy. Among economists, it is a common knowledge that rapid depreciation of the currency, that is, internally via inflation and externally via devaluation, can detrimentally impact on the economy and the currency under utility. Such a scenario can afford a government a chance to defraud those institutions that lent money to them. It has also been argued in many instances that the zero rates of inflation are not a wise t...
9 Pages(2250 words)Essay

General Electric Long Term Financing Policy

The tagline of the company is becoming “bringing good things to life” (“General Electric” n.d.).
Concerning the situation, in this paper, I would like to discuss three sections of General Electric issues. Section 1 is about the company’s long term financing; Section 2 is concerning risk management; and Section 3 is about a synergistic acquisition, which is suitable for General Electric.
In today’s business practices, investors or managements often face a dilemma. At one occasion, they need to develop their business in order to sustain growth but on the other hand they have limited budget to invest. Under such circumstances, a company should consider loan option or use their own money r...
12 Pages(3000 words)Case Study

Has Bush Pursued a Realist Foreign Policy

This discussion will address what will define the entire Bush Presidency, not simply the foreign policy aspect; the illegal, immoral and unrealistic decision to invade Iraq.
The ‘War on Terrorism’ as it is commonly referred to, was a phrase coined by United States government officials and is primarily used to justify the military initiative de jour. It is generally defined as the current conflict between the U.S. and radical Islamic factions with Great Britain being somewhat allied in the effort (Gallington, 2004). Immediately following and as a reactionary response to the 11 September 2001 terrorist attacks on America, Bush stated the country’s intent to initiate a ‘War on Terrorism.’ He charact...
9 Pages(2250 words)Assignment

A Single European Market

The EC community went a step further and created a common currency called the Euro in 1999. Most member states accepted the Euro, with the most notable exception being the United Kingdom which holds in the Pound currency one of the most valued currencies in the world. The SEM framework inspired greater joint laws in order aspects of administrating a region such as common laws in farming and fishery. The evolution of the European Community attracted greater sums of foreign direct investment into the continent. Europe also changed the way its strategic focus in many industrial sectors in the 21st century to compete in the global economy. This report analyzes the European region by dividing the paper into seven major topics: Single E...
11 Pages(2750 words)Assignment

Napoleon and the Transformation of European States and Societies

Napoleon’s unyielding battle cry required huge recruitment into the army, the radical aspect of the modern state that created the main inconsistencies of the Empire making his rule remain contentious (Brown, 2007).

The period of Napoleon, that is 1801-1805, is marked as the formation of the Grande Armee1 and the allied armies of European empires demonstrating warmongering tendencies. It wa5snt just France and Napoleon but also Great Britain, Russia, Austria, and Prussia that were belligerent empires, as is obvious from the outcomes of the Congress of Vienna in 1814-18152. The new geopolitics and resolutions thus resulted in continued till 1848 when revolutions across the continent ended the Vienna arrangement. The...
7 Pages(1750 words)Term Paper

The European Convention For the Protection of Human Rights

Although the European Court of Justice has interpreted the Convention as imposing positive obligations on member states, the text of the Convention itself belies such a claim. Moreover, the supremacy of the provisions contained in the Convention functions to compromise the predictability and consistency of national laws with the result that it places an undue burden on member states. 

The House of Lords together with the House of Commons in its Twenty-sixth Report titled, Joint Committee on Human Rights distinguishes between negative and positive obligations in the context of the European Convention on Human Rights. The joint committee offered the following explanation:

“Most of the ECHR rights are...
14 Pages(3500 words)Term Paper

United States Foreign Policy from 1945-1991

American Presidents presiding over some key events in history, such as the Cuban Missile Crisis, The Cold War, The Vietnam War, etc., were hindered from acting as public representatives due to pressure from the military-industrial complex. John Kennedy, Lyndon Johnson, Ronald Reagan, George Herbert Walker Bush, and George W. Bush – all of them were subject to these opposing interests. But eventually, the corporate-government nexus proved too powerful; and in this sense, American Presidents after the Second World War were largely restricted and powerless to uphold their higher personal values. Most of the strategic moves on part of the United States after the end of the Great War were directly in response to an anticipated th...
11 Pages(2750 words)Essay

The Trade Union Movement in the UK

Before the ERA 1999, union membership and recognition in the UK were characterized by voluntarism, in which employers and employees could bargain over the terms and conditions of employment without any legal interference. With the statutory system ushered in by the new law, voluntary recognition of unions is no longer allowed and it becomes unlawful for British employers to deny recognition to unions under any circumstances. That conveys the impression that ERA created a radical change in British industrial relations. This paper takes the contrary view, however, and proposes that while the new industrial relations law looks revolutionary in principle, there are no fundamental changes in actuality for the change to qualify as &ldqu...
8 Pages(2000 words)Case Study

Information Security Policy of Organization

In the modern age of information technology, there are many threats created for organizational information. Organizations need a security model that has the capability to handle and secure our information reserves. Technical administrative safety /security measures like security plans, actions and procedures are the general practices for the organizational information security procedures. The attentiveness of producing actions is concerned by the organizations to an appreciably smaller level, on the other hand at the same time these are weighed up as being further efficient organizational actions than technical administrative ones. Information security encompasses organizational features, officially authorized aspects, institution...
6 Pages(1500 words)Research Paper

European Union Policy: Turkey

...Running Head: European Union.... Topic: European union policy Order#: 377392 Topic: European union policy Profile of Turkey-history, geography and population: “Area: Approx 780,000 sq km (300,000 sq miles) Population: 71.9m (July 2008 est) Capital city: Ankara People: Majority Turks. Minorities recognised under the Turkish Constitution: Jews, Armenians and Greeks. Other ethnic peoples include Kurds, Circassians and Bosnians. Language: Turkish (official), Kurdish Religion: Muslim Currency: Turkish Lira (TL) Government: Parliamentary republic. Membership of international...
9 Pages(2250 words)Case Study

Global Employee Information and Consultation: Replicating the European Model

A significant step to enhancing the employees’ right to information and consultation is the establishment of the European Works Council (EWC). The EWC Directive (94/45/EC) aims to improve cooperation in transnational companies and to allow trade unions to influence, at least indirectly, the decision-making of corporations (Lockwood and Williams). It requires community-scale undertakings and community-scale groups of undertaking to create this mechanism for regular consultation of the workforce. A ‘community-scale undertaking’ is one with at least 1,000 employees within the Member States and at least 150 employees in each of at least two Member States (Lewis and Sargeant).

An EWC is a forum that would a...
9 Pages(2250 words)Coursework

The European Single Monetary Union

... The European Single Monetary Union A. OBJECTIVES AND CRITERIA The Euro had its roots from the market integration of the European Union. The Single Market Programme (1987-1992) involved the market integration of European Union member countries primarily to create an upsurge in foreign direct investment. The integration was based on the following premises: 1) the increase in the size of the market due to regional integration results to larger scale investment that would not have been profitable in member states’ national markets and 2) regional integration can lead to an increased economic growth rate and foreign direct investment (FDI). Emphasis is usually given to FDI. Policy instruments which Member States had previously employed...
8 Pages(2000 words)Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Monetary policy in EMU (European monetary Union) for FREE!

Contact Us