Fin243 money and banking section 4 report group 3
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FIN243 – Money and Banking Section 4 Report Group 3. Chan Chun Yeuk 053113 Kwan Yi Ting 053114 Chan Kin Ho 053115 Cheung Tsun Fung 053118 Tam Yiu Hon 053120. Should EEC member countries integrate the currency to be Euro?. What is Euro Benefits & drawback

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Fin243 money and banking section 4 report group 3
FIN243 – Money and BankingSection 4Report Group 3

Chan Chun Yeuk 053113

Kwan Yi Ting 053114

Chan Kin Ho 053115

Cheung Tsun Fung 053118

Tam Yiu Hon 053120


Should eec member countries integrate the currency to be euro

Should EEC member countriesintegrate the currency to be Euro?


Fin243 money and banking section 4 report group 3

  • What is Euro

  • Benefits & drawback

  • Analysis> exchange rate> inflation rate

  • conclusion


Fin243 money and banking section 4 report group 3

Make currency not devalue

Robert A. Mundell

1999 Nobel Laureate

in Economics

Father of Euro


What s euro
What’s Euro?

Official currency of the Eurozone



Fin243 money and banking section 4 report group 3

Trichet

(Current president of the European Central Bank)

Duisenberg

(First president of the

European Central Bank)


Coins
Coins

Banknotes


Fin243 money and banking section 4 report group 3

All EU member can join

  • a budget deficit of less than 3% of their GDP

  • a debt ratio of less than 60% of GDP

  • inflation and interest rates close to the EU average


Fin243 money and banking section 4 report group 3

  • 1/1/2007 - Slovenija

  • 1/1/2008 - Eesti Vabariik, Latvijas, Malta, Cyprus

  • 1/1/2009 - Lithuania, Slovakia

  • 1/1/2010 - Czech Republic, Bulgaria

  • 1/1/2011 – Poland, Hungary, Romania


Fin243 money and banking section 4 report group 3

Benefits

&

drawback


The benefits of euro

The benefitsof Euro

Lower transaction rates

Increase trade

Transparency& Competition

Lower bank reserve

Capital Market

Low inflation rates


Drawbacks of euro
Drawbacks of Euro

  • The policies of the members

  • The cooperation of the EEC members

  • Limitation of using Euro

  • External economic factors


Analysis
Analysis

  • exchange rate

  • inflation rate


Fin243 money and banking section 4 report group 3



Fin243 money and banking section 4 report group 3


Fin243 money and banking section 4 report group 3

  • Beside the policy factors in Euro monetary and exchange rate stability.

    in 1999-2002

  • people lack of confidence

    in 2003

  • weakness of the US Dollar

  • between 0.66 and 0.7


Exchange rate variability from 1999 jan to 2007 jan1
exchange rate variability from 1999 Jan to 2007 Jan. monetary and exchange rate stability.

against US dollars


Fin243 money and banking section 4 report group 3

  • same main reason monetary and exchange rate stability.

    2002 July

  • weakness of the US Dollar

  • could Euro replace the state of the US Dollar

  • between 1.1 and 1.3,


Hong kong dollar
Hong Kong Dollar monetary and exchange rate stability.


Fin243 money and banking section 4 report group 3


Fin243 money and banking section 4 report group 3

2003 monetary and exchange rate stability.

  • notdrop anymore

  • already meet its target

  • to satiable the exchange rate.


Inflation rates

Inflation rates monetary and exchange rate stability.


Fin243 money and banking section 4 report group 3

  • Inflation monetary and exchange rate stability.  a general rise in prices

  • Pressure on price adjustment

  • Asymmetries in the transmission mechanism (Cecchetti, 1999)

  • demand & supply shock (Bayoumi & Eichengreen, 1993)


Fin243 money and banking section 4 report group 3

  • New currency monetary and exchange rate stability. not stable

  • Not well developed

  • unpredicted environment factors

  • e.g: exchange rate, oil price.


The inflation rate in euro area and the us
The inflation rate in Euro area and the US monetary and exchange rate stability.


Fin243 money and banking section 4 report group 3

  • From the observe : Euro can monetary and exchange rate stability.

  • successful monetary union

  • low inflation rates

  • price stable

  • productive

  • more investment & consumption

  • Export & import

  • Avoiding loss from emancipated inflation


Fin243 money and banking section 4 report group 3

  • Monetary policy monetary and exchange rate stability. 

  • Lack of degree of freedom to control area –wide inflation

  • minimizing the deviation of area –wide inflation in long-run


Fin243 money and banking section 4 report group 3


Conclusion

Conclusion monetary and exchange rate stability.


Fin243 money and banking section 4 report group 3


Analysis of euro
analysis of Euro monetary and exchange rate stability.

  • Exchange-rate

    2003

    not drop anymore

    stable

  • The Inflation rate

    keep in the low level

    no affect the market

    stable


Fin243 money and banking section 4 report group 3


Fin243 money and banking section 4 report group 3
END monetary and exchange rate stability.