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EURO Birth and Impact on Int Trade

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    BIRTH OF EURO AND ITSIMPACT ON

    INTERNATIONAL TRADE

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    European Steel

    and Coalcommunity

    Rome Treatycreating EEC

    Maastricht Treaty

    creating EU

    v olut ion o f thevol ut ion o f theu rop ean Un io nur ope an Un io n

    http://upload.wikimedia.org/wikipedia/en/e/e9/Schuman_Declaration.jpg
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    ormation of the EU

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    REATIES TIMELINE

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    ormation of the EMU

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    RITERIA TO JOIN EMU

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    TABILITY GROWTH PACT

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    IRTH OF EURO

    3 stages of EMU3 stages of EMU

    Currency of EMUCurrency of EMU

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    HY WAS THE EURO INTRODUCED?

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    Administration

    istered by the Frankfurt-based European Central Bank (ECB) and the Eurosystem (com

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    COINSided into 100 cents (sometimes referred to as euro-cents, especially when distinguishing

    c, 10c, 5c, 2c, and 1c denominations

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    ANK NOTES

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    IRECT AND INDIRECT USAGE6 Member States ofhe European Union usehe euro as theircurrency

    , , ,Belgium Germany Ireland

    , , ,Greece Spain France, , ,Italy Cyprus Luxembourg, ,Malta The Netherlands

    , , ,Austria Portugal Slovenia,Slovakia Finland

    -on participants, ,Bulgaria Czech Republic, , ,Denmark Estonia Latvia, , ,Lithuania Hungary Poland

    ,Romania Sweden and theUnited Kingdom

    IRECT USAGE

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    IRECT AND INDIRECT USAGENDIRECT USAGE

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    THE EURO IN GLOBALMARKETS

    International TradeDerivatives Market

    OTC Interest rate Derivatives

    Debt Securities MarketForeign Exchange Reserve

    Disclosed Currency Composition

    Stability of Exchange rates

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    Share in International Debt Market

    Narrow and Global MeasureNarrow: Only Offshore

    Global: Both Domestic as well as Offshore

    Constant as well as Current rate

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    Observation

    Share of the euro remained relatively stableFrom 27% in 1999 to 30% in 2009 ( Global

    Measure)

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    Share in Global Foreign ExchangeReserves

    IMFs Currency Composition of OfficialForeign Exchange Reserves (COFER)database (COFER is an IMF database that keeps end-of-period

    quarterly data on the currency composition ofofficial foreign exchange reserves)

    Reserve buffers may have been useful inmany vulnerable emerging market

    countries during the crisis.

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    Analysis

    Share of Undisclosed reserves, whichinclude Currencies of China, Australia,India etc

    Drastic fall in reserves of US$, but theundisclosed reserves can be in form ofUS$Also due to depreciation of US$

    Also the rise in EURO could be because ofDepreciation of US$.

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    Share in International Derivatives

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    : :Source BIS Quarterly Review'

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    Exchange Rates

    Source: Oanda.com

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    Source: Oanda.com

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    Analysis

    1999-2002: Depreciation in Eurohigher growth rate of money in the EU

    higher rate of capital accumulation

    higher interest rates in the US

    Post 2002: Appreciation in Eurocoins were finally withdrawn from use

    Euro as medium of exchange, Store of value

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    International Use of Euro

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    1

    8

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    Factors that suits a currency forinternational currency status

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    T a b l e 1 :

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    Continued

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    PRESENTED BY:Aaakriti Kakkar (91001)Aditi Bindlish (91003)Ankit Gupta (91006)Madhusudan Partani (91029)

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