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The 2009 Euro Challenge | EMU and the euro . . . (for dummies?)
EMU and the euro . . . (for dummies?)
Presentation by Nigel Nagarajan
Faculty Orientation for the 2009 Euro Challenge
New York, November 25th 2008
HELLO, MY NAME IS
. . . EMU is not a bird!
1) The euro – countries give up their own currency when they join the euro area. The ECB sets interest rates for the euro area (16)
2) The single market – all countries participate in the single market, with free movement of goods, services, capital and people (27)
3) Enhanced policy coordination – countries retain sovereignty over other economic policies but commit to coordinate more closely at the European level (27/16)
The challenge of asymmetric shocks
(1) Federal fiscal system
(2) High labour mobility
Real world example of a single currency area
Euro area less good at coping with shocks?
Asymmetric shock: oil prices . Affects Texas and Massachusetts differently.
Single monetary policy
set by the ECB
Fiscal and other policies
set by Member States
(but subject to common rules)
Eurogroup Finance Ministers
Federal Reserve Chairman
Ben S. Bernanke
Henry M. Paulson
Economic policy co-ordination more difficult?