The Economic and Monetary Union (EMU) of the EU covers the dexterity of the economic as well as fiscal policies, a common monetary policy in the euro area with the provisions of the common currency, the euro. Being the result of the EU leadership prophesies, the EMU has become a…
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At its beginning stage, in 1990 the EU has made the free capital movement within the euro area and formation of a single market certain. In the second stage the EU introduced the formation of the European Monetary Institute (EMI) in the period of 1994-1999, which is the pioneer of the European Central Bank (ECB). The third and final stage has been traced by introducing the euro currency along with a single and common monetary policy of the European Central Bank in the euro area. It is noted that though each of the member of the EU are also the elements of the EMU, however, the euro area does not consist of all the EU countries. Only the members who have considered the euro as their currency have been incorporated in the euro area. Only these countries are liable towards the ECB’s monetary policy. Except the UK and Denmark, all the member countries of EU have been entailed to become a part of the euro area by meeting the criteria regarding the specific economic convergence standards. The policies regarding the economic surveillances under the framework of the EMU demand that all members should guarantee the harmonization of their economic policies. Beside they are required to grant their mutual supervision of the union and reveal the regulations related with their financial as well as budgetary policies. With the provision of monetary policy, the stability of the single currency, the euro, is supported and emphasized. However, considering the strategy requirements towards the arrangements of pensions, labor or capital market, the fiscal policy, the policies of taxes and expenditures, remains under the control of the individual state governments of the member countries. But for functioning of the EMU directions effectively in accordance with its requisite, a supportive public finance is necessary along with supple and assimilated labor, product, and financial markets. Governments of all the member countries are required to sustain their
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(Monetary and Fiscal Policy in the Euro Area Essay)
“Monetary and Fiscal Policy in the Euro Area Essay”, n.d. https://studentshare.org/miscellaneous/1564671-monetary-and-fiscal-policy-in-the-euro-area.
The role of monetary policy is to maintain price stability because it is a crucial necessity for growth of an economy and welfare of the people. ECB has failed in its major objectives as found during post 2008 financial crisis. The paper attempts to find whether the causes of this failure lie in the absence of appropriate fiscal and banking union without which ECB is unable to exert full control on its member countries.
The tools have been described hereunder. Reduction in Taxes-The governments can opt for reducing the amount of taxes that are imposed on various products. This would not only help in capturing the entire business market, but will also enable effective demand stimulation at large.
My firm is an example of successful bailout in case of tax cuts for 95% of all households including services rendered (Shiller, 2008). If my firm had folded like it was the case in the 2008 economic crash, general effect on the economy and loss of jobs would have turned out to be stunning.
The rationale behind the formation of this association was creation of a strong single European market that would be beneficial for the wholesome economic development of all the member countries, to promote social unity among the people and most importantly, to enhance the prominence of Europe in the global economy (University of Iowa College of Law Center for International Finance and Development, 2013).
(Farinha & Marques 2001). The government often employs fiscal policy, monetary policy or a combination of both to sway the economy back to an equilibrium position. The manner in which the government employs both policies may result to either fiscal or monetary dominance.
In contrast, a decade ago the most recent half-century looked very much less laudable. The pound sterling that would be abandoned with euro membership, created as a definite weight of silver of a specified fineness, possibly as early as the 8th century, and indeed by the 11th.
According to the discussion, Fiscal and Monetary Policy, the object of monetary policy is the stabilization of macroeconomic fundamentals, such as those relating to stable prices, stable growth rates for the economy, and the levels of employment and unemployment, with the ideal being full employment.
Institutions that were concerned with preventing future conflicts in the continent developed the idea to form the European Union.
The European Monetary Union was founded in the year 1999. It was expected to catalyze economic integration in Europe and promote
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